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Business  Trusts 

as  Substitutes  for 

Business  Corporations 


fornia 
nal 

ty 


THOMPSON 


T3736t) 
R20 


UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/businesstrustsasOOthomiala 


Business  Trusts 

as  Substitutes  for 

Business  Corporations 


A    paper    read    before    the    Kansas 
City  Bar  Association,  April  10,  1920 


By 

GUY  A.  THOMPSON,  Esq. 
Op  the  St.  Louis  Bab 


ST.  LOUIS 

THOMASDLAW  BOOK  COMPANY 
1920 


T 
r373(.  t 


DEDICATED  TO 

L.   WADE   CHILDRESS 

AS  A   SLIGHT  TESTIMONIAL  TO  HIS 

STERLING  CHABACTEB  AND  THE 

ESTEEM  IN  WHICH  I  HOLD 

HIS    FRIENDSHIP 

9A^ 


Coyyright,  1920 

By  Guy  A.  Thompsok 

All  riffhts  reserved 


PREFACE. 


Something  more  than  a  year  ago  it  became  necessary  for  me, 
in  the  discharge  of  my  professional  duties,  to  consider  the 
proposed  employment  of  the  express  trust  as  a  vehicle  of  trade. 
Interest  thus  aroused  has  since  led  me  to  read  as  widely  on  the 
subject  as  opportunity  permitted.  I  learned  that  the  atten- 
tion of  lawyers  generally  was  being  directed  to  this  subject. 
Accordingly  when,  recently,  I  accepted  an  invitation  to  ad- 
dress the  Bar  Association  of  Kansas  City,  no  subject  seemed 
to  be  more  opportune  for  discussion — certainly  none,  appro- 
priate for  such  an  occasion,  in  which  I  personally  felt  a  keener 
interest.  The  subjoined  production  was  the  result.  There  was 
no  thought  of  publication  in  its  preparation,  but  merely, 
within  the  necessarily  restricted  limits  of  such  a  paper,  to  se- 
lect for  discussion  those  phases  of  the  subject  which  seemed 
both  interesting  and  fundamental.  Since  its  delivery,  mem- 
bers of  the  Bar,  whose  judgment  I  value,  have  advised  that  it 
be  published,  and  so  numerous  are  the  requests  received  for 
copies  that  I  have  consented  to  its  publication.  I  have  done 
this  with  some  hesitation,  for  it  is  not,  and  in  the  nature  of 
things  could  not  have  been,  a  comprehensive  treatise.  On  the 
contrary,  many  of  the  important  aspects  of  the  subject  were 
of  necessity  eliminated  from  consideration.  Such,  for  exam- 
ple, as  the  duties  of  the  trustees,  their  right  of  indemnity, 
their  liability  to  the  cestuis,  action  by  and  against  the  trus- 
tees, theory  and  extent  of  creditors'  rights  against  the  trus- 
tees and  against  the  trust  estate,  inviolability  of  the  trust 
fund,  seeking  direction  of  the  Chancellor,  etc.  With  this 
foreword  of  explanation  I  submit  the  pages  that  follow  in  the 
hope  that  they  may  be  of  interest  and  possibly  of  service  to 
my  brethren  of  the  Bar. 

Guy  a.  Thompson. 
St.  Louis,  Mo.,  May  1,  1920. 

8 


ANALYTICAL  INDEX 

The  Business  Corpoeation 

I  1.  Its  Rapid  Growth. 

2.  Reasons  for  Delay  in  Development 

3.  Its  Accomplishments. 

4.  Reasons  Therefor. 

6.  Growing  Dissatisfaction  With  the  (Corporation  as  Businew 
Agency. 

6.  Its  Disadvantages. 

7.  Is  There  a  Satisfactory  Substitute. 

The  Business  Teust 

8.  Origin  and  Development  of  the  Express  Trust. 

9.  The  Proposed  Business  Trust. 

10.  Its  Legality. 

11.  May  the  State  Forbid  It. 

12.  Will  Quo  Warranto  Lie  Against  It? 

a.  For  Usurping  the  Privileges  of  a  Corporation. 

b.  For  Usiurplng  the  B*ranchise  of  a  Corporation. 

c.  For  Violating  Constitution. 

13.  Does  It  Afford  Limited  Liability. 

a.  As  to  the  Cestuis  Que  Trust,  or  Shareholders. 

b.  As  to  the  Trustees. 

14.  Advantages  Over  the  Corporation. 

a.  Prejudice. 

b.  Migratory  Rights. 

c.  Inquisitorial  Legislation. 

d.  Taxation. 

16.  Its  Disadvantages  Considered. 

a.  Its  Novelty  and  Consequent  Uncertainty  of  Its  Status. 

b.  Possible  Legislation. 

c.  Nature  of  Cestuis'  Interest  and  Extent  of  Rights  They  May 

Have. 

d.  Perpetuitiea. 
16.  Conclusions. 

Appendix 
Forms  for  Trust  Declarations. 
Forms  for  Trust  Certificates. 


BUSINESS  TRUSTS  AS  SUBSTITUTES  FOR 
BUSINESS  CORPORATIONS 

The  Business  Cobporation 

§  1.  Its  Rapid  Growth:  The  most  remarkable 
fact  of  all  commercial  history  is  the  business  corpora- 
tion. Remarkable  not  only  because  of  the  economic 
and  social  part  it  has  played,  but  remarkable  also  be- 
cause of  the  rapidity  and  magnitude  of  its  growth. 
With  approximate  accuracy  it  may  be  said  that  the 
business  corporation  is  the  product  of  the  past  seventy 
years. 

As  late  as  1775,  so  eminent  an  authority  as  Adam 
Smith  wrote:  ''The  only  trades  which  it  seems  pos- 
sible for  a  joint  stock  company  to  carry  on  success- 
fully without  an  exclusive  privilege  are  those  of  which 
all  the  operations  are  capable  of  being  reduced  to  what 
is  called  a  routine,  or  to  such  a  uniformity  of  method 
as  admits  of  little  or  no  variation.  Of  this  kind  is, 
first,  the  banking  trade;  secondly,  the  trade  of  insur- 
ance from  fire,  and  from  sea  risk  and  capture  in  time 
of  war;  thirdly,  the  trade  of  making  and  maintaining 
a  navigable  cut  or  canal;  and,  fourthly,  the  similar 
trade  of  bringing  water  for  the  supply  of  a  great 
city."' 

There  is  authoritative  warrant  for  the  statement 
that  up  to  the  year  1800  there  were  not  to  exceed  one 
hundred  private  corporations  in  the  entire  United 
States,  that  one-half  of  these  were  in  Massachusetts 


1  Wealth  of  Nations,  Vol.  2,  Book  5,  Part  2.  p.  242. 


6  Business  Trusts  as  Substitutes 

and  that  the  enterprises  carried  on  by  them  were 
banking,  turnpike  roads,  toll  bridges,  canals,  and,  to  a 
very  limited  extent,  manufacturing.^ 

Giving  attention  to  our  own  State  of  Missouri,  it 
may  be  noted  that  during  our  territorial  days  but  two 
private  corporations  were  created  and  both  of  those 
were  banks,  namely:  The  Bank  of  St.  Louis  in  1813 
and  the  Bank  of  Missouri  in  1817.  From  Missouri's 
admission  to  the  sisterhood  of  States  in  1821,  to  the 
year  1850,  while  a  number  of  academies,  colleges  and 
seminaries,  turnpike  road,  insurance  and  railroad 
companies,  and  a  few  bridge  and  bank  companies  were 
incorporated,  yet  it  is  unlikely  that  more  than  fifty 
companies  were  granted  charters  which  now  would 
incorporate  under  the  manufacturing  and  business 
act. 

The  first  English  text  upon  corporations,  Kyd,  was 
published  in  1793  and  dealt  exclusively  with  municipal 
corporations.  The  first  American  text,  that  of  Angel 
and  Ames,  appeared  in  1831,  and  gave  scant  treatment 
to  business  corporations.  Indeed,  it  may  be  said  that 
corporate  literature  and  the  business  corporation  as 
it  exists  today  virtually  begin  with  the  year  1850. 

And  yet  in  1918  there  were  in  the  United  States  at 
least  350,000  business  corporations  with  gross  incomes 
of  $79,500,000,000,  net  incomes  of  $10,730,000,000,  pay- 
ing to  the  Federal  Government  alone  in  income  taxes 
for  the  year  1917,  $2,142,000,000.^ 

§  2.  Reasons  for  Delay  in  Development:  Without 
doubt  their  growth  was  retarded  until  this  late  date 
first  because  of  the  difficulty  and  expense  attendant 


2  WUlIston,  Law  of  Business  Corporations,  2  H.  L.  R.  105,  149. 
s  Statistics  of  Income,  Treas.  Dept.  1919. 


Fob  Business   Corporations  7 

upon  the  securing  of  corporate  charters  and,  second- 
ly, because  the  necessities  of  commerce  were  served 
with  measurable  adequacy  by  the  ordinary  partner- 
ship, and  quasi-partnership, — the  joint  stock  company. 

In  England  only  the  Crown  and  the  Parliament 
could  grant  corporate  charters  and  not  until  1862  was 
the  English  Company's  act  adopted,*  called  by  Sir 
Francis  Palmer,  the  ''Magna  Charter  of  Co-operative 
Enterprises."  In  our  country  it  was  necessary  to  ob- 
tain corporate  charters  by  special  acts  of  the  legisla- 
tures. Excepting  perhaps  a  half  dozen  states,  we  find 
no  general  incorporation  acts  till  toward  the  middle  of 
the  last  century.®  In  Missouri  the  first  general  cor- 
poration act  for  business  companies  was  enacted  in 
1849,*  and  not  until  1865  was  the  creation  of  corpora- 
tions by  special  acts  of  the  legislatures  prohibited  by 
constitutional  provision.'^ 

During  the  early  part  of  the  last  century  the  field  of 
commercial  enterprise  was  held  by  the  ordinary  part- 
nership practically  alone.  But,  the  increase  in  popula- 
tion, the  constantly  growing  settlements  by  the  pio- 
neers of  new  territory,  the  discovery  of  vast  natural  re- 
sources, the  multiplication  and  complexity  of  human 
needs  and  wants,  the  progress  of  inventions  and  par- 
ticularly the  advent  of  steam,  proved  that  the  partner- 
ship was  an  agency  utterly  inadequate  to  commercial 
necessities.  It  was  inadequate  chiefly  because  of  the 
unlimited  liability  of  its  members,  for  this  made  it  im- 


4  25  and  26  Vict.  C.  89. 

5  First  general  incorporation  acts  for   manufacturing  companies 
were  N.  Y.  1811,  Mass.  1836,  Micli.  and  Conn.  1837,  and  Ind.  1838. 

6  Laws  1849,  page  18;  Laws  1864,  page  20;  R.  S.  1865,  Chapter  39, 
367. 

T  Art.  VIII,  Sec.  4. 


8  Business  Trusts  as  Substitutes 

possible  to  mobilize  necessary  capital.  The  result  was 
that  corporations  began  to  increase ;  and  when  the  re- 
straint that  was  imposed  upon  their  formation  was  re- 
moved by  the  enactment  of  general  corporation  acts 
under  which  they  might  be  readily  organized  at  little 
expense,  they  quickly  crowded  the  partnership  from 
the  field  and  started  upon  that  career  which  is  the  out- 
standing feature  of  commercial  history. 

<§  3.  Accomplishments:  Neither  has  the  rapidity 
of  their  growth  exceeded  the  importance  of  their  ac- 
complishments, for,  without  forgetting,  or  in  any  de- 
gree minimizing  or  palliating,  the  gross  frauds,  the 
heavy  oppressions,  and  the  black  iniquities  that  have 
been,  and  are  today  being,  perpetrated  under  the  cor- 
porate cloak,  it  must  be  conceded  by  all  that  the  busi- 
ness corporation  has  been  also  of  immeasurable  bene- 
fit to  mankind.  It  has  played  an  important,  if  not  an 
indispensable,  part  in  the  development  and  progress 
of  our  country  and  the  world.  It  has  afforded  the 
means  for  experiments  essential  to  the  development 
of  our  arts  and  sciences.  It  has  fostered  our  indus- 
tries, cultivated  our  deserts,  brought  from  their  hid- 
ing places  the  stored-up  treasures  of  nature,  harnessed 
the  very  elements  to  the  service  of  mankind,  bridged 
our  rivers,  tunneled  our  mountains,  constructed  our 
railroads  and,  while  linking  our  states  in  closer  unity, 
has  brought  the  nations  of  the  earth  together. 

§  4.  Reasons :  Without  doubt  this  monopolization 
by  the  corporation  of  the  field  of  commercial  endeavor, 
has  been  due  to  the  limited  liability  of  the  investor  or 
stockholder,  for  it  was  this  assurance  that  made  it  pos- 
sible to  mobilize  capital  in  projected  business  enter- 


For  Business   Corporations  9 

prises.  In  this  connection  it  is  interesting  to  recall 
that  we  have  come  far  away  from  the  original  concep- 
tion of  the  chief  value  of  the  corporation.  Since  the 
municipal,  the  ecclesiastical,  the  educational  and  the 
charitable  corporation  preceded  the  regulated  com- 
pany and  the  joint-stock  company,  its  immortality  was 
emphasized  as  the  chief  and  most  valuable  attribute  of 
corporate  existence.  Indeed,  as  late  as  1819,  it  would 
seem  to  be  this  characteristic  that  was  chiefly  empha- 
sized by  our  great  Chief  Justice  in  his  famous  defini- 
tion in  the  Dartmouth  College  case.®  With  the  advent 
of  private  corporations,  it  was  the  right  of  associa- 
tion, governmental  powers  and  trading  privileges  that 
were  chiefly  desired  and  that  were  granted.  Though 
early  decided  that  the  stockholder  was  not  personally 
liable  for  the  debts  of  the  corporation,  yet  the  corpora- 
tion, through  leviations,  could  compel  him  to  pay  the 
sums  assessed.  Later  this  power  was  avoided  by  con- 
tract between  the  stockholder  and  the  company;  but 
until  and  unless  it  was  so  avoided,  the  creditor  might 
enforce  it  in  chancery  through  a  kind  of  subrogation.® 
The  artificial  personality  gradually  came  to  be  empha- 
sized, and  from  that  fiction  was  developed  what  proved 
to  be  the  attribute  of  chief  value,  namely:  the  limited 
liability  of  the  stockholder ;  for,  the  theory  is  that  since 
the  corporation  is  an  artificial  person  entirely  distinct 
from  those  who  have  formed  it,  its  debts  and  obliga- 
tions are  those  of  this  artificial  person  and  not  of  its 
stockholders. 

§  5.    Growing  Dissatisfaction:     And  yet,   though 
its  growth  has  been  marvelous  and  its  accomplish- 


8  4'  Wheat.  518. 

»  Salmon  v.  "Hie  Hamborough  Ca  (1671).  1  Ch.  Ca4S.  204. 


10  Business  Trusts  as  Substitutes 

ments  great,  is  there  not  now  perceptible  an  increas- 
ing dissatisfaction  with  the  corporation  as  a  business 
agency!  Oan  it  be  that  the  very  fiction,  viz.:  imper- 
sonal, artificial  entity  distinct  from  the  persons  com- 
posing it,  which  has  given  such  value  to  the  corporate 
form,  is  now  being  laid  hold  of  to  cripple  its  useful- 
ness? Why  are  business  men,  in  increasing  numbers, 
asking  for  another  device,  some  other  vehicle  or 
agency  of  trade,  that  will  serve  the  needs  of  commerce 
and  be  free  from  oppressive  exactions? 

§  6.  Disadvantages:  That  there  are  corporate 
disadvantages  must  be  conceded.  Prejudice  is  one  of 
them.  It  is  reflected  daily  in  our  courts,  in  the  ver- 
dicts of  juries,  while  our  legislatures  too  frequently 
respond  to  it. 

Again,  the  corporation  being  an  artificial  person, 
existing  only  in  contemplation  of  law  and  by  force  of 
law,  can  have  no  legal  existence  beyond  the  boundaries 
of  the  sovereignty  which  created  it.  **It  must  dwell 
in  the  place  of  its  creation  and  can  not  migrate  to  an- 
other sovereignty."^"  It  is  not  a  citizen  within  the 
meaning  of  Article  4,  Section  2  of  the  Constitution  of 
the  United  States,  providing  that ' '  the  citizens  of  each 
state  shall  be  entitled  to  all  privileges  and  immunities 
of  citizens  in  the  several  states.""  It  follows  that  it 
may  do  business  in  another  state  only  by  comity,  and 
that  the  other  state  may  prescribe  such  conditions  as 
it  will  (not  discriminatory)  upon  the  right  of  the  for- 
eign corporation  to  transact  business  within  its  bor- 
ders.    The   consequent   cost   and   inconvenience   are 


10  Bank  of  Augusta  v.  Earl,  38  U.  S.  (13  Peters)  519. 

11  Paul  V.  Virginia,  8  Wall.  178. 


For  Busi^s^ess   Corporations  11 

harassing  and  burdensome   to   the   corporation  that 
transacts  business  in  several  states. 

Constantly  changing  legislation  and  the  necessarily- 
attendant  uncertainty  are  additional  impediments,  for 
there  is  no  assurance  whatever  that  the  law  of  today 
with  respect  to  corporate  rights  will  remain  as  the  law 
of  tomorrow. 

Inquisatorial  legislation  and  the  state's  visitorial 
powers,  finding  expression  in  the  necessity  of  making 
multitudinous  reports,  and  of  submitting  to  examina- 
tions by  state  authorities,  are  also  disagreeable  fea- 
tures of  corporate  existence. 

Above  all,  perhaps,  taxation  presents  the  most  for- 
midable objection  to  corporate  life,  for  it  seems  that 
we  have  entered  upon  a  new  economic  era,  in  which 
revenue  in  large  part  is  to  be  collected  from  the  public 
indirectly  through  corporate  levies. 

§  7.  Is  There  a  Substitute:  Is  there  any  arrange- 
ment men  may  make,  any  form  of  agreement  they  may 
enter  into  under  which  they  may  serve  the  require- 
ments of  commerce  and  trade  as  satisfactorily  as  does 
the  corporation?  The  ordinary  partnership  will  not 
answer.  Its  necessarily  limited  resources  and  the  un- 
limited liability  of  its  members  have  already  proven 
this.  The  limited  partnership  is  no  more  satisfactory 
since  it  is  rendered  impracticable  by  statutory  require- 
ments. Neither  will  we  find  our  answer  in  the  quasi- 
partnership, — ^the  joint-stock  company,  for,  while  it  af- 
fords advantages  not  found  in  the  ordinary  partner- 
ship, still  it  contains  the  very  element  of  the  ordinary 
partnership  that  causes  its  rejection,  namely:  the  un- 
limited liability  of  its  stockholders. 


12  Business  Trusts  as  Substitutes 

The  vehicle  for  which  we  seek,  therefore,  must,  as  its 
essential  characteristic,  afford  limited  liability  to  the 
investor;  for,  unless  it  is  possible  for  men  to  con- 
tribute to  a  business  enterprise  without  thereby  endan- 
gering their  entire  private  fortunes,  it  will  be  futile 
to  attempt  the  mobilization  of  capital  in  amounts  suffi- 
cient to  transact  any  considerable  part  of  the  busi- 
ness of  the  country. 


For  Business   Corporations  13 


The  Business  Trust 

§  8.  Origin  and  Development:  Whether  derived 
from  the  Boman  fidei-commissa,^^  or,  as  Mr.  Justice 
Holmes  concludes,  from  the  German  law,"  all 
students  of  the  law  will  agree  with  Professor 
Maitland  that  "Of  all  the  exploits  of  equity 
the  largest  and  most  important  is  the  invention 
and  development  of  the  Trust.  It  is  an  institute  of 
great  elasticity  and  generality;  as  elastic,  as  general 
as  contract.""  A  remarkable  tribute  this  to  an  insti- 
tution the  parents  of  which  were  Fraud  and  Fear, 
and  whose  nurse  was  a  Court  of  Conscience;"  for  it 
should  be  remembered  that  in  its  youthful  days  the 
trust  or  use,  if  not  devised,  was  still  employed  by  the 
debtor  to  avoid  his  creditor,  by  the  freeholder  to  be 
relieved  from  the  feudal  burdens  he  owed  his  lord,  and 
by  the  ecclessiastic  to  avoid  the  mortmain  statutes." 
It  was  also  laid  hold  of  during  the  wars  of  York  and 
Lancaster  to  prevent  forfeitures  of  estates  for  trea- 
son.^* Later,  with  the  increase  in  property,  the  multi- 
plication of  investments  and  the  increasing  complexity 
in  financial  affairs,  it  reached  its  maturity  and  was 
used  in  the  making  of  marriage  and  family  settlements 
and  settlements  upon  charities.    It  is  of  the  express 


12  Spence  Equitable  Juris,  Vol.  1,  p.  435. 

1*  Early  English  Equity,  1  L.  Quarterly  Rev.  162. 

15  Lectures  on  Equity,  p.  23. 

16  Sir  Robert  Atkyns  in  argument,  Attorney    General   y.    Sands, 
Hard.  491. 

"Lewin,  Trusts  (12th  Ed.)  1. 
18  Perry,  Trusts  (6th  Ed.),  Sec.  S. 


14  Business  Trusts  as  Substitutes 

trust  so  employed  we  are  accustomed  to  think,  and 
with  which  we  are  the  most  familiar. 

§  9.  The  Proposed  Business  Trust:  Now  it  is 
urged  by  members  of  our  profession  who,  to  a  serious 
consideration  of  the  subject,  have  brought  wide  re- 
search and  a  wealth  of  learning,  that  this  'institute  of 
great  elasticity  and  generality,  as  elastic,  as  general 
as  contract,'  may  be  utilized  in  the  field  of  commerce 
and  trade  as  an  effective  substitute  for  the  ordinary 
private  business  corporation."  Its  use,  as  they  sug- 
gest, closely  resembles  in  form  the  incorporated  com- 
pany. It  is  created  by  the  execution  of  a  declaration 
of  trust,  usually  by  three  or  more  trustees,  to  whom 
there  has  been,  or  will  presently  be,  transferred  or 
paid  the  property  or  money  to  constitute  the  corpus 
of  the  trust.  It  recites:  (1)  the  property  to  constitute 
the  corpus  of  the  trust  and  that  the  corpus  shall  be  by 
the  trustees  managed  and  disposed  of  for  the  benefit 
of  the  holders  from  time  to  time  of  the  transferable 
certificates  of  shares,  or  beneficial  interest,  issued  and 
to  be  issued  by  the  trustee  thereunder;  (2)  if  desired, 
the  number  of  shares  or  of  beneficial  interests  that 
may  be  issued;  their  character,  whether  common  or 
preferred,  or  both  (for  both  may  be  issued) ;  and 
the  nominal  or  par  value  if  they  are  to  have  an 
expressed  par  value;  (3)  the  business  to  be  conducted 
by  the  trustees  and  an  elaborate  recitation  of  the  pow- 


18  S.  R.  Wrightington,  of  the  Boston  Bar,  see  his  "Unincorporated 
Associations;"  John  H.  Sears,  formerly  of  the  St.  Louis  and  now  of 
the  New  York  Bar,  see  his  "Trust  Estates  As  Business  Companies;" 
Alfred  D.  Chandler,  of  the  Boston  Bar,  see  his  "Express  Trusts  Under 
the  Common  Law;"  and  Prof.  H.  L.  Wilgus,  see  his  "Corporations 
and  Express  Trusts  as  Business  Organizations,"  13  Mich.  L.  Rev.  70, 
205. 


Fob  Business  Cobporations  15 

ers  they  may  exercise  in  its  prosecution  and  in  the  man- 
agement of  the  corpus;  (4)  usually  a  clause  providing 
that  creditors  shall  look  only  to  the  funds  and  prop- 
erty of  the  trust  for  payment,  and  requiring  the  trus- 
tees to  incorporate  in  their  contracts  a  provision  to 
this  effect;  (5)  that  the  shareholders  shall  have  no 
title  to  the  trust  property  but  only  the  right  at  the 
termination  of  the  trust  to  share  pro  rata  in  the  pro- 
ceeds of  the  sale  of  the  property  thereof,  and  mean- 
while to  income,  which  shall  be  distributed  when  and 
as  provided  therein;  and  that  the  death  of  a  share- 
holder shall  not  operate  to  terminate  the  trust  or  en- 
title his  legal  representative  to  an  accounting;  (6)  gen- 
erally a  name  and  provision  for  the  adoption  of  a 
seal;  (7)  the  trustees'  compensation  and  the  manner 
and  time  of  choosing  trustees  and  filling  vacancies; 
(8)  the  extreme  limit  of  time  during  which  the  trust 
may  continue,  usually  not  more  than  twenty-one  years 
after  the  death  of  the  last  surviving  original  trustee. 
Such  other  provisions  as  appear  appropriate  and  de- 
sirable may,  of  course,  be  added.  Thus  the  corpus  of 
the  trust  corresponds  to  the  capital  of  the  incorporated 
company,  the  trustees  to  the  Board  of  Directors,  the 
beneficiaries  or  cestuis  que  trust  to  the  stockholders, 
and  the  beneficial  interests  or  shares  to  the  corpora- 
tion's shares  of  stock. 

§  10.  Its  Legality  Considered:  We  purpose  to 
consider  this  proposal  solely  from  the  standpoint  of 
the  investor. 

The  comparative  novelty  of  this  employment  of  the 
express  trust,  at  once  excites  inquiry  as  to  its  legality. 
Equity  has  long  since  established  the  principle  that  all 
persons  sui  juris  have  the  same  power  to  create  trusts 


.16  Business  Trusts  as  Substitutes 

that  they  have  to  make  a  disposition  of  their  property ; 
*  *  that  every  one  competent  to  enter  into  a  contract,  or 
to  make  a  will,  or  to  deal  with  the  legal  title  to  prop- 
erty, may  make  such  disposition  of  it  as  he  pleases; 
and  he  may  annex  such  conditions  and  limitations  to 
the  enjoyment  of  it  as  he  sees  fit;  and  he  may  vest  it 
in  trustees  for  the  purpose  of  carrying  out  his  inten- 
tion."^" Or,  as  said  by  Lewin:"  "It  may  be  laid 
down  as  a  general  rule  that  whoever  is  competent  to 
deal  with  the  legal  estate  may,  if  he  so  disposes,  vest 
it  in  a  trustee  for  the  purpose  of  executing  the  settlor's 
intentions. ' '  While  not  customary,  it  has  not  been  un- 
usual for  a  testator  in  his  will  to  designate  that  a 
trustee  therein  appointed  shall,  for  a  limited  time, 
carry  on  the  business  of  a  partnership  of  which  testa- 
tor was  a  member,  and  it  must  be  conceded  that  no 
legal  objection  has  been  found  to  this  use  of  the  trust." 
Again,  since  a  settlor  may  convey  property  to  a  trus- 
tee in  trust  for  himself  and  others"  there  would  seem 
to  be  no  legal  objection  to  the  business  trust  upon  the 
ground  that  the  beneficiaries  thereof  are  themselves 
the  settlors.  It  has  been  judicially  determined  by  two 
notable  decisions,  one  in  England  and  one  in  North 
Dakota,  that  a  business  trust  created  by  a  debtor  with 
himself  and  his  creditors  as  cestuis  que  trust  is  a  valid 
arrangement  which  equity  will  recognize  and  enforce.^* 


20  Perry,  Trusts,  6th  Ed.,  Sec.  13. 

21  Trusts,  12th  Ed.,  Chap.  3,  Sec.  1. 

22Burwell  v.  Mandevllle's  Executor,  43  U.  S.  (2  How.)  506;  Smith 
V.  Ayer,  101  U.  S.  320;  Ex  parte  Richardson,  3  Maddoclcs,  Ch.  79. 

23  In  re  Est.  of  foulard,  141  Mo.  642 ;  Mcllvaine  v.  Smith,  42  Mo. 
45;  Lampert  v.  Haydel,  96  Mo.  439, 

24  Cox  V.  Hickman,  9  C.  B.   (N.  0.)   47;   Wells-Stone  Mercantile 
Co.  V.  Grover,  7  N.  Dak.  460. 


For  Business   Corporations  17 

As  long  ago  as  1880,  in  Smith  v.  Anderson,"  which  is 
without  doubt  the  leading  English  case  upon  this  sub- 
ject, the  court  of  Chancery  gave  judicial  recognition 
and  approval  to  a  trust  of  the  character  we  are  now  dis- 
cussing. For  at  least  the  past  thirty-five  years,  in  the 
State  of  Massachusetts,  the  business  trust  has  been  a 
recognized  institution  of  great  utility.^*  In  at  least 
three  decisions  by  the  Supreme  Court  of  the  United 
States,  presently  to  be  noticed,  it  has  received  judicial 
recognition.  Likewise  in  other  cases  here  and  ther-e 
(only  a  few  it  is  true)  the  courts  have  approved 
them. 

Therefore,  it  may  be  fairly  concluded  that  weapons 
of  attack  have  not  as  yet  been  used  to  destroy  the 
legality  of  the  business  trust.  However,  every  inno- 
vation to  serve  commercial  needs  has  met  with  opposi- 
tion. Indeed,  this  was  true  of  the  corporation,  and  it 
is  reasonable  to  assume  that  the  express  trust  as  an 
agency  of  trade,  if  it  shall  be  increasingly  used,  will 
be  subjected  to  the  closest  legal  scrutiny  and  that  ob- 
jections to  it  not  yet  considered  will  be  found. 

Recently  the  Attorney  General  of  the  State  of  Ohio, 


25  15  Ch.  D.  247;  see  also  Crowther  v.  Thorley,  50  L.  T.  43;  In  re 
Siddall,  54  L.  J.  Ch.  682;  In  re  Thomas,  54  L.  J.  Q.  B.  336;  In  re 
Faure  Electric  Ace.  Co.,  40  Ch.  Div.  141,  151,  152. 

26Hoadley  v.  County  Comrs.,  105  Mass.  519;  Whitman  v.  Porter, 
107  Mass.  522;  Shoe  &  Leather  Co.  v.  Dix,  123  Mass.  148;  Gleason  v. 
McKay,  134  Mass.  419;  Phillips  v.  Blatchord,  137  Mass.  519;  Ricker 
V.  American  Loan  and  Trust  Company,  140  Mass.  346;  Mayo  v. 
Moritz,  151  Mass.  481;  Hussey  v.  Arnold,  185  Mass.  202;  Wil- 
liams V.  Boston,  208  Mass.  497;  Williams  v.  Johnson,  208  Mass.  544; 
Williams  v.  Milton,  215  Mass.  1;  Frost  v.  Thompson,  219  Mass.  361; 
Rand  v.  Farquhar,  226  Mass.  91;  Dana  v.  Treas.  and  Recr.  Genl.,  227 
Mass.  562;  Cunningham  v.  Bright,  228  Mass.  385;  Priestley  v.  Treas. 
and  R.  Genl.,  230  Mass.  452;  Kimball  v.  Whitney  (Mass.),  123  N.  E. 
665;  Tax  Comrs.  (Mass.)  Rep.  House  Doc.  No.  1646;  also  House 
Doc.  No.  1788. 


18  Business  Trusts  as  Substitutes 

answering  an  inquiry  from  the  Commissioner  of  Se- 
curities as  to  whether  a  trust,  seemingly  of  the  char- 
acter we  are  considering,  was  valid,  rendered  an 
opinion  holding  that  it  was  not,  because,  in  his  judg- 
ment, it  had  the  appearance  of  a  corporation,  its  mode 
of  conducting  business  was  such  as  was  calculated  to 
impress  the  general  public  with  the  belief  that  it  was 
a  corporation,  and  its  acts  and  mode  of  organization 
and  control  were  such  as  appertained  to  corporations, 
or  were  done  after  the  manner  of  corporations.  There- 
fore, he  held  it  was  violative  of  a  statute  of  Ohio  au- 
thorizing an  action  in  quo  warranto  to  be  brought 
"against  an  association  of  persons  who  act  as  a  cor- 
poration within  this  State  without  being  legally  incor- 
porated. ' '" 

This  suggests,  first,  whether  the  state  may,  by  con- 
stitutional statutory  provision,  forbid  this  proposed 
use  of  the  trust,  and,  second,  the  further  inquiry 
whether,  in  the  absence  of  statute,  quo  warranto  would 
lie  for  assuming  or  usurping  the  privileges,  or  the 
franchise,  of  an  incorporation. 

^  11.  May  the  State  Forbid  It:  The  question  is 
not  whether  the  state  may  constitutionally  abolish  the 
express  trust  in  the  interest  of  the  public  welfare,  but 
whether  it  may  prevent  such  use  of  the  trust  as  we  are 
considering.  The  constitutionality  of  such  preventive 
legislation  is  a  question,  the  adequate  consideration 
of  which  this  occasion  does  not  permit.  Suffice  it  to 
observe  that  such  legislation  could  find  warrant  only 
in  the  police  power ;  that  there  is  a  limit  beyond  which 
that  power  may  not  be  exercised ;  that  if  a  business,  or 
the  manner  in  which  a  business  is  conducted,  is  in- 


27  Opinion  No.  675,  dated  Aug.  19,  1919. 


For  Business   Corporations  19 

jurious  to  the  community  it  may  not  shield  itself  be- 
hind the  constitutional  guaranty  of  life  or  contract; 
that  if  a  business,  or  the  manner  in  which  it  is  con- 
ducted, is  not  injurious  to  the  community,  these  con- 
stitutional bulwarks  render  it  impervious  to  legisla- 
tive attack;  and  that  whether  considerations  of  the 
public  advantage  require  the  suppression  of  a  trade, 
avocation  or  business,  or  the  means  by  which,  or  the 
manner  in  which  it  is  conducted,  can  not  be  decided  by 
mere  legislative  fiat,  but  remains  for  final  determina- 
tion by  the  court  under  the  facts  as  they  actually  exist 
in  the  light  of  recognized  legal  principles  and  consti- 
tutional rights. 

§  12.  Will  Quo  Warranto  Lie:  Concerning  the 
second  inquiry  suggested,  namely:  Whether,  in  the 
absence  of  statute,  quo  warranto  would  lie  for  assum- 
ing or  usurping  the  privileges  or  the  franchise  of  a 
corporation,  it  is  submitted  that  it  should  not. 

a.  For  Usurping  the  Privileges  of  a  Corporation'. 
The  privileges  exercised  by  the  business  trust  are 
those  which  are  merely  accessory  as  distinguished  from 
essential  attributes  or  privileges  of  the  corporation.^* 
It  was  formerly  thought  that  the  privilege  of  having 
transferable  shares  could  be  had  only  by  charter  from 
the  Crown  or  by  act  of  Parliament,  and  that  pretend- 
ing to  be  possessed  of  this  privilege  was  pretending  to 
act  as  a  corporation,  and  that,  therefore,  it  was  illegal 
at  common  law  to  attempt  to  create  a  body  not  having 
the  protection  of  the  King's  charter,  the  shares  of 
which  might  be  assigned  without  any  control  or  re- 
striction whatsoever.    This  view  has  been  long  since 


28  Warner  v.  Beers,  23  Wend.  103,  190. 


20  Business  Trusts  as  Substitutes 

exploded  and  would  be  now  dismissed  with  that  state- 
ment except  for  its  historic  interest  and  relation  to  the 
subject  under  discussion,  and  that  even  to  this  day 
it  is  an  impression  widely  prevailing  among  the 
laity. 

The  joint-stock  company,  that  is  an  unincorporated 
company  with  numerous  members  or  partners  holding 
transferable  shares,  was  recognized  as  a  valuable  in- 
strument of  commerce  as  early  as  the  last  decade  of 
the  seventeenth  century.  While  such  company  was  a 
partnership  in  that  unlimited  liability  for  its  obliga- 
tions rested  upon  its  members  or  shareholders,  still  it 
differed  from  the  ordinary  partnership  in  the  multi- 
plicity of  the  members  or  partners,  the  absence  of  the 
principle  delectus  personae  in  consequence  of  the 
transferability  of  shares  or  interests,  and  in  the  fact 
that  it  was  not  dissolved  by  the  death  of  a  member. 
While  it  was  useful  for  the  mobilization  of  credit,  its 
very  existence  encouraged  wild  speculation  and  be- 
came the  means  of  perpetrating  gross  frauds.  Many 
of  these  companies  also  assumed  to  operate  under 
abandoned  corporate  charters  whose  powers  were 
utterly  foreign  to  the  purpose  of  the  new  organiza- 
tion. England's  tremendously  expanding  commerce 
following  the  treaty  of  Utrecht  in  1713  found  these 
joint  stock  companies  rapidly  increasing;  and  with 
their  increase  the  public  was  seized  with  a  mania  for 
stock  gambling  and  speculation.  They  were  organized 
for  the  promotion  of  the  most  chimerical  and  whimsi- 
cal schemes.  For  example,  one  company  was  formed 
**for  breeding  silk  worms  in  Chelsea  Park;"  another 
**for  importing  a  number  of  large  jackasses  from 
Spain  in  order  to  propogate  a  larger  kind  of  mule  in 
England;"  another  **for  making  salt  water  fresh;" 


Foe  Business  Corporations  21 

while  another  project  was  thus  advertised  in  the  news- 
papers: '*For  subscribing  two  million  to  a  certain 
promising  or  profitable  design  which  will  hereafter  be 
promulgated.'""  An  authoritative  historian  refers  to 
the  year  1720  as  '*a  year  remarkable  beyond  any  other 
which  can  be  pitched  upon  by  historians  for  extraordi- 
nary and  romantic  projects,  proposals  and  undertak- 
ings, both  national  and  private.'""  He  further  rec- 
ords: *'Any  impudent  impostor,  while  the  delirium 
was  at  its  greatest  height,  need  only  to  hire  a  room  at 
some  coffee  house,  or  some  other  house  near  that  alley 
(exchange  alley)  for  a  few  hours  and  open  a  subscrip- 
tion book  for  somewhat  relative  to  commerce,  manufac- 
ture, plantations  or  of  some  supposed  invention,  either 
newly  hatched  out  of  his  own  brain,  or  else  stolen  from 
any  of  the  abortive  projects  of  which  we  have  given  an 
account  in  former  reigns,  having  first  advertised  it  in 
the  newspapers  the  preceding  day,  and  he  might  in  a 
few  hours  find  subscriptions  for  one  or  two  millions  (in 
some  cases  more)  of  imaginary  stock.  .  .  .  Among 
these  many  bubbles,  there  were  some  so  bareface  and 
palpably  gross  as  to  not  have  so  much  as  the  shadow  of 
anything  like  feasibility."^^  Accordingly,  that  same 
year  (1720)  in  order  to  put  an  end  to  such  companies 
and  the  feverish  speculation  that  was  proving  so  harm- 
ful to  the  nation,  Parliament  passed  tliat  famous  act 
known  as  the  *  'Bubble  Act. '  '^^  The  act  in  terms  seemed 
to  make  it  an  offense  for  any  except  an  incorporated 
company  to  raise  transferable  shares  of  stock,  and  at 
first  it  was  so  construed,  the  decisions  seemingly  going 


29  Anderson's  Hist,  of  Com,,  V.  3,  p.  103. 

30  Anderson's  Hist,  of  Com.,  V.  3,  p.  91. 
81 V.  3,  p.  102. 

82  6  George  I,  C.  18,  Sec.  18. 


22  Business  Tbusts  as  Substitutes 

to  the  extent  of  holding  that  regardless  of  the  act  it 
was  illegal  at  common  law  for  any  unincorporated  so- 
ciety to  raise  transferable  shares.^'  Finally,  however, 
more  than  a  century  after  the  act  was  passed,  and,  in- 
deed, after  it  had  been  expressly  repealed,^*  it  was 
definitely  decided  by  the  English  courts  (1)  that  the 
act  was  directed  at  the  raising  of  transferable  shares 
only  in  those  unincorporated  companies  whose  pur- 
poses were  mischievous  and  tended  to  the  common 
grievance,  and  (2)  that  it  was  not  an  offense  at  com- 
mon law  for  an  unincorporated  company  to  have  and 
issue  transferable  shares.^"  Therefore,  as  said  by 
Judge  Lindley:'*  "The  legality  at  common  law  of 
such  companies  may,  therefore,  be  considered  as  fin- 
ally established."  It  further  seems  that  this  ground 
of  illegality  was  urged  chiefly  because  of  the  rule  of 
pleading  established  by  the  courts  requiring  that  all 
partners,  however  numerous,  must  be  made  parties  de- 
fendant. The  shareholders  of  these  unincorporated 
companies  being  partners  in  contemplation  of  law,  and 
the  judges  finding  it  necessary  to  adhere  to  this  rule  of 
pleading  considered  such  companies  mischievous  and 
illegal." 


88  Vansandan  v.  Moore,  8  East.  516 ;  Kinder  v.  Taylor,  not  reported 
but  referred  to  and  quoted  in  part  by  Collyer,  Law  of  Partnership, 
6th  Ed.;  Ellison  v.  Ri§nold  (1821),  2  Jac.  and  Walk.  503;  Josephs 
V.  Pebrer  (1825),  3  Barn,  and  Cres.  639;  Duvergier  v.  Fellows  (1828), 

5  Bing.  248;  affd.  10  B.  and  C.  1826;  Blundell  v.  Winsor  (1837),  8 
Sim.  601. 

84  In  1825,  by  6  George  4,  C.  91, 

sBKing  V.  Webb  (1811),  14  East,  506;  Walburn  v.  Ingelby  (1832), 
1  Mylne  and  K.  61;  Garrard  v.  Hardey  (1843),  5  Mann,  and  Gr.  1.  c. 
257;  Harrison  v.  Heathorn  (1846),  6  Mann,  and  Gr,  81;  Re  Mexican 

6  So,  Am,  Co,  (1859),  27  Beav,  474,  4  DeG,  and  J,  320, 

86  Law  of  Companies,  5th  Ed,  Chap.  4,  p,  133. 

87  LIndley,  Law  of  Companies,  5th  Ed.,  p.  134. 


For  Business   Corporations  23 

As  it  was  both  difficult  and  costly  to  obtain  a  cor- 
porate charter  and  the  Bubble  Act  stopped  the  develop- 
ment of  the  joint  stock  society,  enterprise  languished 
and  '  *  for  upwards  of  a  century  industry  was  deprived 
of  a  certain  amount  of  capital  which  would  otherwise 
have  been  available.'"* 

Therefore,  it  may  be  taken  as  firmly  established  that 
the  privilege  of  raising  and  issuing  transferable  shares 
is  a  common  law  right  and  not  a  privilege  peculiar  to 
the  corporation.  The  fact  that  the  exercise  of  this  right 
by  the  quasi-partnership  or  joint-stock  company  is  in 
derogation  of  the  p(rinciple  delectus  personae,  and 
makes  it  difficult  for  the  purposes  of  suit  to  identify 
the  partners,  lends  an  emphasis  to  the  objection  to  its 
exercise  by  such  companies  which  does  not  obtain  with 
the  trust.  In  the  case  of  the  pure  trust,  because  of  the 
absence  of  personal  liability  of  the  cestuis  que  trust, 
the  public  is  indifferent  to  the  changing  personnel  of 
the  beneficiaries.  This  is  a  matter  of  important  con- 
sideration with  the  business  trust,  in  view  of  the  re- 
quirement of  equity  that  the  beneficiaries  of  a  trust  be 
identified.  Since,  in  the  business  trust,  with  changing 
beneficiaries  the  shares  or  certificates  of  beneficial  in- 
terest furnish  the  indicia  of  identification,  their  legality 
is,  of  course,  essential. 

In  this  connection,  it  should  be  noted  that  as  yet 
there  has  been  no  satisfactory  determination  of  the 
exact  nature  of  the  cestuis'  interests  in  a  business  trust, 
that  is,  whether  they  are  mere  choses  in  action,  or 
equitable  interests,  estates  or  titles  in  the  corpus.  Upon 
principle  it  would  seem  that  they  should  be  regarded 
not  as  jura  in  rem,  but  jura  in  personam,  mere  choses 


38  Scott,  Const,  and  Finance  of  English,  Scottish  and  Irish  Joint 
Stock  Cos.,  v.  1,  p.  438. 


24  Business  Trusts  as  Substitutes 

in  action.^^  Nevertheless,  since  equitable  interests  are 
commonly  regarded  not  as  mere  choses  in  action  but  as 
interests  in  the  corpus,  when  so  regarded  their  charac- 
ter will  be  determined  by  the  character  of  the  corpus, 
being  considered  as  personalty  or  realty  as  the  corpus 
is  personalty  or  realty.  A  recent  decision  contains  a 
dictum  that  where  the  property  of  the  trust  is  real 
property  ''the  provision  for  assignability  of  shares 
without  complying  with  the  formalities  necessary  for  a 
conveyance  of  real  estate  does  not  make  them  personal 
property.  They  represent  equitable  interests  in  the 
corpus  and  if  the  corpus  is  real  estate  it  would  seem 
that  the  transferability  would  depend  upon  the  law 
governing  the  transfer  of  interests  in  real  estate  in  the 
place  where  the  real  estate  was  situated,  in  the  absence 
of  legislative  authority  making  special  provision  for 
their  transfer."*"  If  the  capital  or  corpus  of  the  trust 
consists  solely  of  realty  and  the  trustees  are  directed 
to  convert  it  into  cash  at  the  termination  of  the  trust, 
then  no  equitable  conversion  will  be  deemed  to  have 
occurred  and  the  property  remains  real  property.  If 
the  corpus  consists  of  both  personal  and  real  property 
and  the  trustees  are  directed  to  convert  at  the  termina- 
tion of  the  trust,  then,  under  some  cases,  an  equitable 
conversion  will  be  deemed  to  have  taken  place  at  the 
inception  of  the  trust  and  the  entire  fund  will  be  con- 
sidered personalty  from  that  time  forward.*^  To  avoid 
any  possibility  that  the  shareholders  shall  be  em- 
barrassed in  their  right  to  transfer  their  interests. 


39Maitland,  Equity,  p.  112;  Langdell  (1877),  Summary  of  Equity 
Pleading,  90, 

40  Bartlett  v.  Gill,  221  Fed.  476. 

41  Dana  v.  Treasurer  and  Receiver  General,  227  Mass.  562 ;  Priest- 
ley V.  Treasurer  and  Receiver  General,  230  Mass.  452;  Bartlett  v. 
Gill,  supra. 


Foe  Business   Corporations  25 

whatever  the  nature  of  these  interests  may  be,  by  mere 
assignment  of  their  certificates,  it  is  advisable  that  the 
declaration  of  trust  contain  a  peremptory  direction  to 
the  trustees  to  convert  the  property,  but  allowing  such 
conversion  to  be  postponed  in  their  discretion.  The 
corpus,  though  consisting  of  real  property  alone,  will 
then  unquestionably  be  considered  as  having  been  con- 
verted from  the  beginning  and  the  interests  of  the  bene- 
ficiaries would  be  regarded,  if  not  mere  choses  in  action, 
then  as  interests  in  personal  property  and  hence  per- 
sonalty. This  consideration  is  also  of  importance  in 
connection  with  questions  of  inheritance  and  other 
taxes  that  may  arise. 

We  conclude,  therefore,  that  the  business  trust  does 
not  usurp  the  privileges  of  the  corporation. 

b.    For  Usurping  the  Franchise  of  a  Corporation: 

Neither  can  it  be  said  to  usurp  the  franchise  of  a  corpo- 
ration. As  well  said  by  the  Missouri  Springfield  Court 
of  Appeals :  * '  The  corporate  franchise  is  the  right  to 
exist  as  an  entity  for  the  purpose  of  doing  things  which 
are  permitted  under  the  law  authorizing  the  incorpora- 
tion. The  things  which  the  corporation  is  authorized 
to  do  are  its  powers  as  distinguished  from  its  fran- 
chise, that  is  its  right  to  exist  as  a  corporation. ' '"  As 
the  franchise,  the  distinguishing  feature  of  the  cor- 
poration, is  the  artificial  personality  distinct  from  the 
individuals  composing  it,  there  can  be  no  usurpation  of 
corporate  function  unless  there  be  an  assumption  of 
such  distinguishing  personality.  To  quote  Judge  Lind- 
ley  again :*^    ''What  distinguishes  corporations  from 

42  state  on  Inf.  v.  Business  Men's  Athletic  Club,  163  S.  W.  901,  1.  c. 
907. 
«Law  of  Companies,  5tli  Ed.,  p.  134. 


20  Business  Trusts  as  Substitutes 

other  bodies  is  their  independent  personality;  and  no 
society  which  does  not  arrogate  to  itself  this  character 
can  be  fairly  said  to  assume  to  act  as  a  corporation."** 

c.  Constitutional  Objection:  Another  objection 
which  reasonably  may  be  expected  to  be  raised  is  this : 
Our  (Missouri)  State  Constitution,  Sec.  II,  Art.  12,  pro- 
vides :  ''The  term  'corporation'  as  used  in  this  article 
shall  be  construed  to  include  all  joint-stock  companies 
or  associations  having  any  powers  or  privileges  not 
possessed  by  individuals  or  partnerships."  The  same 
definition  appears  as  the  first  section  of  our  laws  relat- 
ing generally  to  corporations.*^  A  great  number  of  the 
states  have  the  same  or  substantially  the  same  consti- 
tutional provision.  It  may  be  urged,  therefore,  that 
the  business  trust  is  a  corporation  within  the  meaning 
of  this  constitutional  definition,  and  that,  not  haviQg 
been  incorporated  in  the  manner  prescribed  by  law,  it 
should  not  be  recognized  as  a  lawful  institution  and 
may  be  dissolved  by  quo  warranto. 

This  objection,  though  not  free  from  difficulty,  should 
not  prevail.  If  the  arrangement  proposed  is  a  pure 
trust  and  avoids  associate  powers  among  the  bene- 
ficiaries it  certainly  cannot  be  considered  to  be  a 
"joint-stock  company"  or  an  "association,"  whether 
the  word  "association"  is  to  be  qualified  by  "joint- 
stock"  or  not.*'  Otherwise  it  might  be  unsafe  to  con- 
stitute any  trust  with  more  than  one  trustee  and  one 
beneficiary,  particularly  if  intended  that  the  trustees 
should  conduct  or  transact  any  business.  Again,  does 
not  the  constitutional  provision  mean  joint-stock  com- 

**  See  also  Theodore  W.  Dwight,  "The  Legally  of  Trusts,"  Pol.  S. 
Quar.,  V.  3,  p.  610. 

*8  R.  S.  Mo.  1899,  Sec.  2963. 

40  See  opinion  of  James,  L.  J.,  in  Smith  v.  Anderson. 


Fob  Business  Corporations  27 

panies  and  associations  that  have  and  exercise  under 
grant  of  the  sovereign,  powers  and  privileges  not  pos- 
sessed by  individuals  or  partnerships!  Furthermore, 
properly  to  interpret  this  section  requires  that  it  be 
read  in  conjunction  with  Section  2  of  the  same  article, 
providing  that  "no  corporation  after  the  adoption  of 
this  constitution  shall  be  created  by  special  laws." 
When  it  is  remembered  that  these  sections  first  ap- 
peared in  the  constitution  of  1865,  and  that  their  pur- 
pose was  to  put  an  end  to  the  practice  of  granting  cor- 
porate charters  by  special  acts  of  the  legislature,  it 
seems  manifest  that  the  intention  was  to  define  ''cor- 
poration" and  provide  that  no  such  thing  thereafter 
could  be  created  by  special  laws.  Hence,  even  if  the 
business  trust  is  to  be  considered  as  a  ''joint-stock  com- 
pany" or  "association,"  with  powers  and  privileges 
not  possessed  by  individuals  or  partnerships,  it  could 
reasonably  be  urged  that  the  only  effect  of  the  consti- 
tutional provisions  referred  to  is  to  preclude  their 
establishment  by  special  laws.  Again,  so  far  from 
rendering  invalid  such  stock  companies  and  associa- 
tions our  courts  have  construed  this  constitutional  and 
statutory  definition  to  be  recognition  of  them,  entitling 
them  to  sue  and  be  sued  "as  entities"  in  the  courts  of 
our  state,  and  recent  statutory  amendment  so  regards 
them.*^  These  views  find  support  in  a  very  carefully 
considered  and  exhaustive  opinion  by  the  Supreme 
Court  of  Idaho,"  though  perhaps  they  are  at  variance, 
in  part  at  least,  with  a  recent  decision  of  the  Supreme 
Court  of  Kansas." 


*7  Wientchter  v.  Miller  (Sup.  Ct.  Mo.),  208  S.  W.  38;  WiUiams  v. 
U.  S.  Express  Co.,  195  Mo.  App.  362;  Acts  Mo.,  1915,  p.  225. 

*8  Spottswood  V.  Morris,  12  Idaho  360,  6  L.  R.  A.  (N.  S.)  665. 

49  The  Home  Lumber  Company,  et  al,  v.  Hopkins,  Attorney  Gen- 
eral, et  al,  filed  Feb.  7, 1920. 


28  Business  Trusts  as  Substitutes 

§  13.  Does  It  Afford  Limited  Liability:  Assuming 
therefore,  the  legality  of  the  business  trust,  the  all  im- 
portant question  arises  whether  it  possesses  that  at- 
tribute which  is  indispensable  if  it  is  to  serve  as  a  sub- 
stitute for  the  business  corporation,  namely:  limited 
liability  of  the  investors  or  shareholders. 

/  First.    As  to  the  Cestuis  Que  Trust  or  Shareholders : 

The  law  is  firmly  settled  that  the  cestui  que  trust  is  not 
personally  liable  for  the  obligations  incurred  by  the 
trustee  in  the  management  of  the  trust  estate.  This, 
for  the  reason  that  the  trustee  has  no  authority  to  bind 
I  ex  directo  the  cestui  que  trust.  The  trustee  is  not  an 
agent  but,  upon  the  contrary,  he  himself  is  the  prin- 
cipal. He  is  the  owner  (in  trust  it  is  true)  of  the  prop- 
erty, and  the  business  he  transacts  is  his  business,  even 
though  another  is  to  receive  the  benefits  or  profits 
therefrom.  **A  trustee  is  a  man  who  is  the  owner  of 
the  property  and  deals  with  it  as  principal,  as  owner 
and  as  master,  subject  only  to  an  equitable  obligation 
to  account  to  persons  to  whom  he  stands  in  the  relation 
of  trustee  and  who  are  the  cestuis  que  trust. "^'^  Since, 
in  relation  to  the  property  and  the  business  in  which  it 
is  employed,  he  stands  as  proprietor,  as  principal,  as 
master,  upon  no  recognized  principle  of  law  can  the 
beneficiary  be  held  for  his  obligations  with  respect  to 
that  property  and  that  business.  Therefore,  in  the  few 
cases  that  have  arisen  in  which  creditors  of  trustees  in 
business  trusts  have  undertaken  to  hold  the  sharehold- 
ers liable  they  have  failed." 


so  Smith  V.  Anderson,  supra. 

51  Cox  V.  Hickman,  8  H.  L.  C.  268;  Wells-Stone  Mercantile  Co.  v. 
Grover,  7  N.  Dak.  406;  Mayo  v.  Moritz,  151  Mass.  481;  Rhode  Island 
Hospital  Trust  Co,  v.  Copeland,  39  R.  I.  193;  Johnson  v.  Lewis,  6 
Fed.  27. 


For   Business   Corporations  29 

If  the  declaration  of  trust  confers  absolute  and  un- 
controlled power  upon  the  trustees  with  respect  to  the 
management  of  the  property  given  them  and  the  bene- 
ficiaries have  only  the  rights  that  are  implied  because 
they  are  fundamental  to  the  trust  relation,  viz :  to  call 
upon  the  trustees  to  account,  to  have  them  removed 
for  misconduct  or  neglect,  to  receive  the  income  while 
the  trust  lasts,  and  their  share  of  the  corpus  or  of  the 
conversion  thereof  upon  its  termination,  then  plainly 
the  arrangement  is  a  pure  trust  and  the  shareholders 
are  not  liable  to  creditors.  It  transpires,  however,  that 
sometimes  a  declaration  of  trust  has  been  so  drawn 
that  it  is  uncertain  whether  it  constitutes  in  truth  a 
trust.  This  arises  from  the  fact  that  the  provisions 
thereof  have  given  certain  rights  to  the  beneficiaries  in 
addition  to  and  beyond  those  fundamentally  and  neces- 
sarily adherent  to  the  cestui  que  trust.  For  example, 
the  right  to  hold  meetings  and  fill  vacancies  among  the 
trustees;  to  elect  the  trustees  periodically;  to  remove 
trustees  and  choose  successors;  to  initiate  and  adopt 
and  to  consent  to  amendments  to  the  trust  agreement ; 
to  direct  or  agree  to  a  termination  of  the  trust ;  and  to 
give  directions  to  the  trustees. 

In  any  of  such  cases,  it  is  submitted  that  the  inquiry 
should  be,  who  are  the  owners  of  the  property  and  of 
the  business  in  which  it  is  employed?  If  the  trustees, 
they  are  the  principals,  the  masters,  and  the  arrange- 
ment is  a  strict  trust ;  if  the  shareholders,  they  are  the 
principals,  tRe  masters,  and  the  trustees,  so  called,  are 
mere  agents  and  a  strict  trust  does  not  exist.  If  the 
shareholders  are  the  principals  and  the  trustees  their 
agents,  then  it  would  follow  of  necessity  that  the  share- 
holders would  be  personally  liable  for  the  conduct  of 
their  agents  and  that  too  whether  they  (shareholders) 


30  Business  Trusts  as  Substitutes 

constitute  a  partnership  or  not.    At  least,  this  would 
be  true  in  the  absence  of  contract  or  estoppel. 

Now  to  determine  whether  the  trustees  are  the  own- 
ers of  the  property  and  of  the  business  in  which  it  is 
employed,  the  intention  of  the  parties  as  expressed  in 
the  trust  instrument  should  control.  That  is,  the  legal 
intention — the  intention  which  the  law  will  impute  to 
them  from  what  they  have  written.  If  the  instrument 
is  in  trust  form  and  expressly  or  impliedly  indicates 
that  it  is  not  the  intention  that  the  trustees  shall  have 
authority  to  bind  the  shareholders  persong,lly,  and 
reserves  to  the  shareholders  only  those  rights 
which  are  consonant  with  the  relation  of  trustee  and 
cestui  que  trust,  then  a  trust  has  been  established,  even 
though  those  rights  may  also  be  such  as  pertain  to  other 
relations.  For  example,  a  principal  may  discharge  his 
agent  and  employ  another,  and  so  may  a  partnership 
and  joint  stock  company;  but  so  may  the  settlor  of  a 
trust  empower  the  cestui  que  truest  to  remove  the  trus- 
tee and  appoint  a  successor.^^  The  principal  may  im- 
pose upon  his  agent  new  powers  and  duties,  and  so  may 
a  partnership  and  joint-stock  company;  but  the  creator 
of  a  trust  may  likewise  give  the  beneficiaries  the  right 
to  annul  uses  and  appoint  new  uses  in  place  thereof.^^ 
The  principal,  the  partnership  and  the  joint-stock  com- 
pany, having  an  agent  to  sell  property,  may  make  his 
right  to  sell  dependent  upon  the  employer's  acquies- 
cence first  obtained,  and  so  may  the  settlor  of  a  trust 
provide  that  the  trustee,  before  disposing  of  the  prop- 
erty, shall  first  obtain  the  consent  of  the   cestui   que 


62  May  V.  May,  167  XJ.  S.  310;  March  v.  Romare,  116  Fed.  355;  Fos- 
ter V.  Qoree,  4  Ala.  440;  Perry  on  Trusts  (6th  Ed.),  Sec.  287. 

53  28  Am.  and  Eng.  Encyc.  of  Law,  2d  Ed.,  p.  1105,  and  cases  there 
cited. 


Foe  Business   Corpobations  31 

trust.^*  Why  may  not  association,  which  is  essential 
to  the  partnership,  be  also  enjoyed  by  cestuis  que  trust 
and,  indeed,  be  provided  for  by  the  trust  instrument. 
The  possession  by  the  cestuis  que  trust  of  these  rights, 
in  addition  to  those  already  mentioned  as  being  rights 
which  they  impliedly  have  by  virtue  of  the  trust  rela- 
tion, should  by  no  means  of  itself  deprive  the  trustees 
of  their  ownership  of  the  property  and  of  the  business 
in  which  it  is  directed  to  be  employed.  The  benefici- 
aries may  have  these  additional  rights  and  the  trustees 
still  be  the  owners  of  the  property  and  of  the  business, 
if  that  is  what  was  intended  by  the  parties. 

In  Williams  v.  Milton,  215  Mass.  1,  Judge  Loring  un- 
dertook to  establish  a  test  by  which  to  determine 
whether  a  strict  trust  has  been  created.  He  says  that 
this  depends  upon  (a)  the  association  provided  for 
among  the  cestuis,  and  (b)  the  nature  and  extent  of 
the  rights  reserved  to  them;  that  if  they  are  to  asso- 
ciate through  meetings  and  have  rights  sufficient  in  ex- 
tent to  make  them  the  masters  over  the  trustees,  then 
the  arrangement  is  not  a  trust,  but  is  a  partnership. 
But  the  trouble  with  this  test  is  that  it  does  not  enable 
us  to  know  just  what  association  and  how  much  power 
make  cestuis  partners.  In  this  very  case  the  share- 
holders had  the  right  (a)  to  consent  to  an  alteration  or 
amendment  of  the  trust  instrument,  and  (b)  to  a  ter- 
mination of  the  trust  before  the  time  fixed  in  the  deed. 
It  was  held  that  these  were  not  rights  sufficient  in  ex- 
tent to  convert  the  trustees  into  agents,  and  thereby 
the  arrangement  into  a  partnership,  but  that  the  trus- 
tees still  remained  the  ** masters  of  the  trust  property." 


/ 


54  Hamilton  v.  N,  Y.  Stock  Ex.,  20  Hun.  88;  Gindrat  v.  Montgom- 
ery G.  L.  Co.,  82  Ala.  596;  Loring  v.  Salisbury  Mills,  125  Mass.  138. 


32  Business  Trusts  as  Substitutes 

On  the  other  hand,  the  same  opinion  indicates  that 
should  a  trust  instrument  reserve  to  the  beneficial  own- 
ers the  right  to  elect  the  trustees  and  their  officers 
annually,"  or  the  right  to  hold  meetings,  remove  trus- 
tees, give  instructions  to  trustees,  alter  or  amend  the 
declaration  of  trust  and  direct  the  trustees  to  termi- 
nate the  trust,'*^  the  so-called  trustees  would  be  con- 
sidered as  mere  agents,  the  certificate  owners  prin- 
cipals and  the  arrangement  a  partnership.  But,  says 
this  same  opinion,  the  mere  right  of  the  shareholders 
to  have  meetings  and  to  amend  the  declaration  of  trust 
by  conferring  additional  powers  upon  the  trustees  will 
not  make  them  partners." 

The  inconelusiveness  and  unsatisfactory  character 
of  the  Williams  v.  Milton  test  is  further  emphasized  by 
cases  in  Rhode  Island  and  Kansas  since  decided.^*  In 
the  former,  the  common  shareholders  had  the  right  to 
remove  a  trustee  and  appoint  a  new  one  in  his  stead, 
and  meetings  of  the  shareholders  were  provided  for  at 
which  they  might  amend  the  declaration  of  trust  ''with 
the  consent  of  the  trustees ' '  and  terminate  the  trust  at 
any  time.  And  yet  the  arrangement  was  held  to  be  a 
strict  trust  and  these  rights  in  the  cestuis  insufficient 
to  constitute  a  partnership.  In  the  Kansas  case  re- 
ferred to,  the  trust  instrument  made  provision  for 
meetings  of  the  shareholders  and  the  election  by  them 
of  the  trustees  annually,  and  this  was  held  not  to  be 


65  Whitman  v.  Porter,  107  Mass.  522. 

56  Williams  v.  Boston,  208  Mass.  97. 

57  Williams  v.  Johnson,  208  Mass.  544;  In  this  connection  see  also, 
In  re  The  Associated  Trust,  222  Fed.  1012;  Connally  v.  Lyons,  82 
Tex.  664,  and  Frost  v.  Thompson,  219  Mass.  360. 

68  Rhode  Islland  Hospital  Trust  Co.  v.  Copeland,  39  R.  I.  193;  Home 
Lumber  Co.,  et  al.  v,  Hopkins,  Attorney  General,  et  al.,  filed  Feb.  7, 
1920. 


Foe  Business  Corporations  33 

control  of  sufficient  ** extent,"  to  deprive  the  arrange- 
ment of  the  character  of  a  ''true  trust."  Under  the 
aforesaid  test  laid  down  in  Williams  v.  Milton,  as  ap- 
plied in  later  Massachusetts  cases,"^  the  trust  instru- 
ments under  consideration  in  both  the  Rhode  Island 
and  Kansas  cases  might  reasonably  be  held  to  consti- 
tute partnerships. 

Again,  if  power  to  control  the  trustees  is  alone  to  be 
absolutely  decisive,  then  what  shall  we  say  when  the 
cestuis  have  the  right  to  be  trustees  and,  pursuant  to 
such  right,  cestuis,  owning  a  majority,  or  perhaps 
ninety  or  ninety-five  per  cent  of  the  beneficial  shares, 
constitute  the  Board  of  Trustees  ? 

Williams  v.  Milton  is  fairly  subject  to  criticism  be- 
cause (1)  it  assumes  there  can  be  no  middle  ground  be- 
tween the  trust  and  the  partnership  and  that  if  there 
is  no  trust  there  must  be  a  partnership.  This  we  are 
unwilling  to  concede.  (2)  It  assumes  that  if  there  is  a 
partnership  there  can  be  no  trust.  On  principle  this 
should  not  be  so,  particularly  if  the  corpus  is  personal 
property.  Why  may  not  a  partnership  itself  be  the  ces- 
tui que  trust?  Two  of  the  three  judges  in  Smith  v.  An- 
derson clearly  held  that  an  "association"  might  be  the 
beneficiary  of  an  express  trust.  (3)  And,  above  all,  it 
makes  the  question  more  complex  by  giving  insufficient 
consideration  to  the  intention  of  the  parties  and  by 
approaching  it  from  the  field  of  partnership  and  exam- 
ining it  in  the  light  of  the  law  of  partnership  seeing  if, 
perchance,  characteristics  of  that  relation  may  not  be 
found ;  whereas  it  should  be  approached  from  the  field 
of  the  express  trust,  remembering  that  the  expressed 


89  Dana  v.  TreasurOT  and  Receiver  General,  227  Mass.  562;  Priest- 
ley V.  Treasurer  and  Receiver  General,  230  Mass.  452. 


34  Business  Trusts  as  Substitutes 

intention  of  the  parties  must  control  and  having  in 
mind  the  principles  and  rules  of  equity  concerning  the 
trust  relation. 

Therefore,  we  urge  that  though  under  the  trust  in- 
strument the  cestuis  have  rights  in  addition  to  those 
necessarily  adhering  to  the  trust  relation,  even  though 
such  additional  rights  may  pertain  to  other  relations 
such  as  principal  and  agent,  partnership  and  joint- 
stock  company,  nevertheless,  if  they  are  also  rights 
which  under  established  principles  of  equity,  a  cestui 
may  enjoy,  and  the  instrument  discloses  otherwise  that 
a  trust  was  intended,  then  effect  should  be  given  the  in- 
tention of  the  parties  and  the  trustees  be  held  to  be  the 
owners  of  the  property  and  of  the  business — the  prin- 
cipals, the  masters.  ''It  is  the  intention  of  the  party 
that  creates  and  governs  uses  and  trusts. '  '^° 

Until  more  general  consideration  shall  have  been 
given  to  this  question  by  the  courts,  and  it  can  be  said 
that  there  is  a  preponderance  of  authority,  the  only 
absolutely  safe  course  to  pursue  in  drafting  the  trust 
instrument,  is  to  see  to  it  that  the  shareholders  are  not 
given  therein  associate  relation  or  any  rights  beyond 
those  which  the  law  implies  and  affixes  to  the  cestui  que 
trust. 

It  must  not  be  concluded,  however,  that,  if  the  dec- 
laration does  not  create  a  strict  trust,  it  of  necessity 
follows  that  the  shareholders  are  liable  as  partners,  or 
otherwise,  for  the  conduct  of  the  so-called  trustees. 
Even  in  such  circumstances,  if  the  declaration  provides 
against  liability  upon  the  part  of  the  cestuis  que  trust, 
subjects  the  trust  estate  to  the  discharge  of  all  obliga- 
tions, requires  creditors  to  look  solely  to  the  funds  of 
the  estate  for  payment  and  the  trustees  to  so  contract, 

60  Hale,  C.  B.  in  Atty.  Gen.  v.  Sands,  Hard.  1.  c.  494. 


Foe  Business  Cobporations  35 

the  creditor  may,  by  contract,  be  required  to  look  solely 
to  the  trust  property  for  reimbursement.*^ 

Second.  As  to  the  Trustees — Who  May  Be  and 
Their  Liability:  Here  again  the  established  prin- 
ciples of  equity  control.  Speaking  generally,  any 
whom  the  settlors  or  creators  of  the  trust  desire,  may 
be  selected  to  be  the  trustees.  Cestuis  que  trust  are  not 
disqualified  from  being  also  trustees,  for,  while  the  rule 
is  that,  if  the  equitable  and  the  legal  estates  meet  in  one 
and  the  same  person,  the  equitable  estate  merges  into 
the  legal  estate,  thereby  extinguishing  the  trust  or  con- 
fidence, yet  both  estates  must  be  commensurate  with 
each  other,  otherwise  there  can  be  no  merger.  There- 
fore, there  should  be  no  legal  objection  to  the  trustees 
being  cestuis  que  trust,  certainly  not  if  they  are  not  all 
of  the  cestuis  que  trust.^^'-  Indeed,  it  has  been  empha- 
sized that  in  such  a  case  it  would  be  presumed  that  in 
promoting  the  interests  of  the  cestuis  que  trust  the 
trustees  to  so  great  an  extent  promote  their  own  inter- 
ests.*^ But  manifestly  one  may  not  be  a  trustee  if  he 
himself  is  in  fact  the  settlor  and  sole  beneficiary.*^ 

The  trustee  is  not  an  agent  either  of  the  cestuis  que 
trust  or  of  the  estate.  He  is  the  owner  of  the  trust 
property  and  of  the  trust  business.  He  is  the  principal, 
the  master.  Therefore,  his  acts  are  his  own  acts,  his 
contracts  are  his  own  contracts  and  for  both  he  is  per- 
sonally responsible.**  More  than  half  a  century  ago  a 
very  eminent  authority  upon  the  law  of  Trustees  wrote : 

61  Kimball  v.  Whitney  (Sup.  Ct.  Mass.),  123  N.  E.  665;  Shoe  & 
Leather  Co.  v.  Dix,  123  Mass.  148;  Hussey  v.  Arnold,  185  Mass.  202; 
Bank  of  Topeka  v.  Eaton,  100  Fed.  8,  affd.  107  Fed.  1003. 

«ia  Murry  v.  King,  153  Mo.  App.  710,  715. 

«2  Heard  v.  March,  12  Cush.  580. 

«3  Cunningham  v.  Bright,  228  Mass.  385. 

«*  Taylor  v.  Davis,  110  U.  S.  330;  Connally  v.  Lyons,  82  Tex.  664. 


36  Business  Trusts  as  Substitutes 

/  **In  the  present  state  of  the  law,  no  trustee  oould  be 
advised  under  any  circumstances  to  undertake  the  re- 
sponsibility of  carrying  on  any  trade  for  others.  For 
by  so  doing  he  adopts  the  same  risks  and  liabilities  as 
persons  who  trade  on  their  own  account,  while  he  can 
participate  in  none  of  the  profits ;  and,  as  a  matter  of 
ordinary  prudence,  a  trust  for  such  a  purpose  should 
be  unhesitatingly  declined. ' ''°  To  this  consideration  a 
very  thoughtful  writer  attributes  the  fact  that  cor- 
porate organization  has  been  preferred  to  trusts  for 
carrying  on  trade.*"  Whatever  deterrent  effect  this 
ominous  statement  of  the  law  may  have  had  in  the  past, 
the  apprehensions  excited  by  it  have,  in  recent  years, 
been  greatly  allayed  by  the  protection  which  insur- 
ance affords  and  by  the  growing  practice  among 
trustees  of  contracting  against  personal  liability.  The 
right  of  the  trustee  to  so  contract,  and  thereby  to  re- 
quire the  creditor  to  look  solely  to  the  trust  estate  for 
compensation,  is  now  fully  recognized.  As  said  by  Mr. 
Justice  Woods  in  Taylor  v.  Davis :"  ' 'If  a  trustee  con- 
tracting for  the  benefit  of  a  trust  wants  to  protect  him- 
self from  individual  liability  on  the  contract,  he  must 
stipulate  that  he  is  not  to  be  personally  responsible,  but 
that  the  other  party  is  to  look  solely  to  the  trust  es- 
tate.""^ The  trust  instrument,  therefore,  should  pro- 
vide against  personal  liability  upon  the  part  of  the 
trustees  and  that  those  with  whom  they  deal  must  look 
to  the  property  of  the  trust  for  compensation,  and  in 


65  Hill,  Trustee  (4th  Am.  Ed.)  534. 

«6  Sears,  Trust  Estates  and  Business  Companies,  Sec.  27. 

«T  110  U.  S.  330. 

«8  See  also  Bank  of  Topeka  v.  Eaton,  100  Fed.  8,  affd.  107  Fed. 
1003;  Shoe  and  Leather  Co.  v.  Dix,  123  Mass.  148;  Hussey  t.  Arnold, 
185  Mass.  202 ;  Rand  v.  Farquhar,  226  Mass.  91. 


Fob  Business  Coeporations  37 

their  contracts  the  trustees  should,  by  explicit  refer- 
ence to  that  provision  of  the  trust,  give  notice  of  their 
exemption  from  personal  liability,  and  that  the  other 
contracting  party  must  look  solely  to  the  property  of 
the  trust  for  payment  of  any  obligation.  In  any  event, 
of  course,  the  trustees  have  the  right  to  indemnify 
themselves  out  of  the  property  of  the  trust  estate. 

§  14.  Advantages  Over  Corporations:  Let  us  con- 
sider the  business  trust  in  connection  with  the  cor- 
porate disadvantages  we  have  already  mentioned. 

a.  Prejudice:  There  is  a  popular  significance  at- 
tached to  the  word  ''Trust,"  making  it  synonymous 
with  ''monopoly,"  or  "conspiracy  in  restraint  of 
trade. ' '  This  does  not  presage  a  reception  of  the  busi- 
ness trust  by  the  public  with  a  mind  free  from  pre- 
judice. Until  this  odious  impression  can  be  removed, 
and  the  people  come  to  understand  the  true  signifi- 
cance of  the  express  trust,  and  its  use  as  a  legitimate 
vehicle  of  trade,  it  is  unlikely  that  it  will  find  the  public 
attitude  toward  it  more  benign  than  does  the  corpora- 
tion. 

b.  Migratory  rights  considered,  the  business  trust 
has  a  decided  advantage  over  the  corporation,  for  the 
trustees  are  "persons"  and  also  "citizens"  within  the 
meaning  of  Section  2,  Article  4  of  the  Constitution  of 
the  United  States  and  they  are,  therefore,  entitled  to 
all  the  privileges  and  immunities  of  citizens  in  the  sev- 
eral states,  and  they  may  of  right  go  into  every  state 
and  there  transact  business  without  molestation  upon 
equal  terms  with  every  other  citizen.*' 

c.  Inquisitorial  Legislation :  Again,  for  the  present 


«9  Farmers'  Land  and  T.  Co.  v.  Chicago,  etc.,  Ry.  Co.,  27  Fed.  146; 
Shirk  V.  Lafayette,  52  Fed.  855;  Roby  v.  Smith,  131  Ind.  342. 


38  Business  Trusts  as  Substitutes 

at  least,  the  business  trust  is  free  from  the  necessity 
of  making  periodical  reports  and  from  inquisitorial 
legislation  of  every  kind.  There  is,  of  course,  no  as- 
surance how  long  this  condition  will  continue.  But  how 
far  the  state  may  constitutionally  go  in  attempts  to  reg- 
ulate business  transacted  in  this  form  pursuant  to  the 
exercise  of  the  common  law  right  of  contract,  and 
whether  the  business  trust  may  constitutionally  be 
singled  out  from  all  other  trusts  to  be  the  object  of 
legislative  attack,  are  questions  that  will  be  ever  pre- 
sent to  operate  as  deterrents  against  hasty  or  radical 
action.  Then  too  the  question  whether  exactions  may 
be  imposed  upon  this  form  of  commercial  activity  ar- 
ranged under  the  right  of  contract,  which  are  not  im- 
posed upon  partnerships,  will  also  give  the  legislature 
pause.  It  is  interesting  to  note  that  in  Massachu- 
setts, except  in  the  cases  of  trusts  holding  securities 
of  public  service  corporations,  the  legislature  has 
never  undertaken  to  require  more  than  the  public  filing 
of  the  declaration  of  trust. 

d.  Taxation:  In  matters  of  taxation  the  advan- 
tage is  decidedly  with  the  business  trust.  The  corpora- 
tion must  pay  an  organization  tax,  a  property  tax,  a 
franchise  tax,  a  state  and  federal  capital  stock  tax,  and 
a  state  and  federal  income  tax.  If  it  would  establish 
agencies  in  other  states  it  must  do  so  upon  the  terms 
prescribed  by  those  states,  paying  always  an  incorpora- 
tion tax  to  be  followed  in  turn  with  the  obligation  of 
there  also  making  the  various  reports  and  paying  the 
various  assessments  imposed  upon  corporations.  Then 
there  is  the  stock  transfer  tax  and  often  the  separate 
tax  against  the  shareholder  upon  his  shares,  even 
though  he  lives  in  the  state  of  the  corporation's 
nativity.    With  the  express  trust,  on  the  contrary,  it  is 


Foe  Business   Corporations  39 

believed  that  no  case  can  be  found  upholding  the  right 
to  tax  the  corpus  of  the  trust  estate  and  also  the  equita- 
ble interest  therein.  Manifestly  this  would  be  double 
taxation  and  would  impose  a  burden  upon  those  need- 
ing the  protection  of  the  trust  which  others  more  for- 
tunate in  not  needing  that  protection  would  escape. 
Since  the  business  trust  is  the  creation  of  the  parties' 
common  law  right  of  contract,  a  franchise  tax  could  not 
be  imposed  upon  it ;  and  the  Supreme  Court  of  Massa- 
chusetts decided  that  the  shares  in  a  trust  held  to  be  a 
partnership  could  not  be  taxed  to  the  owner  ;^°  also 
that  an  excise  tax  on  corporations  could  not  constitu- 
tionally be  applied  to  such  associations.^^  It  should  be 
noted,  however,  that  a  majority  of  the  judges  of  that 
court  in  an  opinion  to  the  legislature  held  that  a  stock 
transfer  tax,  including  tax  on  shares  in  unincorporated 
associations,  would  be  constitutional." 

The  Federal  Corporation  Tax  Law  of  1909  provided 
for  the  payment  of  a  special  excise  tax  by  * '  every  cor- 
poration, joint  stock  company,  or  association  organized 
for  profit  and  having  a  capital  stock  represented  by 
shares. ' '  The  United  States  Supreme  Court  held  that 
a  trust  formed  for  the  purpose  of  purchasing,  holding 
and  selling  lands  and  buildings  in  Boston  was  not  re- 
quired to  pay  any  taxes  under  this  law.  This  upon  the 
ground  that  the  tax  was  an  excise  tax  upon  the  privi- 
lege of  doing  business  in  a  corporate  capacity  and  with 
the  advantages  which  arise  from  corporate  or  quasi- 
corporate  organization.  It  was,  therefore,  said  that 
the  act  should  be  held  not  to  apply  to  such  a  trust  but 


70  Hoadley  v.  County  Commissioners,  105  Mass.  519. 

71  Gleason  v.  McKay,  134  Mass.  419,  and  Mlnnot  r.  Winthrop,  162 
Mass.  113. 

72  Opinions  of  Justices,  196  Mass.  603. 


40  Business  Trusts  as  Substitutes 

to  embrace  ''only  such  corporations  and  joint  stock 
associations  as  are  organized  under  some  statute  or 
derive  from  that  source  some  quality  or  benefit  not 
existing  at  the  common  law."" 

Perhaps  to  the  case  of  Crocker  v.  Malley/*  more 
than  to  any  other  one  thing,  should  be  attributed  the 
widespread  and  growing  interest  in  the  business  trust. 
The  Court  had  under  consideration  a  trust  instrument 
known  as  The  Wachusett  Eealty  Trust,  drawn  by  Mr. 
Felix  Rackemann  of  the  Boston  Bar.  This  instrument, 
with  clearness  and  brevity,  combines  adequate  compre- 
hensiveness and  may  well  serve  as  a  model  (see  ap- 
pendix). It  enjoys  the  distinction  of  being  the  first  and, 
thus  far,  the  only  instrument  of  the  class  we  are  con- 
sidering to  be  held  by  the  highest  court  of  the  land  to 
constitute  a  pure  trust.  Though  consent  of  the  bene- 
ficial owners  was  required  to  fill  a  vacancy  among  the 
trustees,  and  for  a  modification  of  the  terms  of  the 
trust,  the  court  held  that  the  agreement  did  not  consti- 
tute either  a  joint-stock  company,  association  or  part- 
nership within  the  meaning  of  the  income  tax  act  of 
1913,  but  that  it  was  a  pure  trust  and  should  be  assessed 
under  the  provisions  of  that  act  relating  to  fiduciaries. 
In  view  of  the  decision  in  that  case,  it  is  believed  that 
under  the  present  income  tax  law  such  a  trust  would 
not  be  considered  a  *' corporation, "  or  ''person,"  as 
those  terms  are  defined  in  the  act,  but  that  the  tax 
would  have  to  be  levied  under  the  sections  relating  to 
estates  and  trusts,  and  fiduciaries. 

§  15.  Disadvantages:  Candor  requires  the  admis- 
sion, however,  that  the  business  trust  is  not  entirely 


78  Eliot  V.  Freeman,  220  U.  S.  178. 
1*  249  U.  S.  223. 


Fob  Business   Corporations  41 

without  its  disadvantages.  As  a  practical  matter,  the 
greatest  of  these  no  doubt  is  the  very  fact  that  it  is 
comparatively  new,  that  is,  that  it  has  not  been  in  gen- 
eral use,  and  that  its  status  therefore,  is  as  yet  not 
well  defined.  That  it  will,  in  the  course  of  time,  incite 
legislation  of  some  character,  it  is  reasonable  to  expect, 
and  what  the  nature  of  this  legislation  will  be,  or  to 
what  extent  it  may  constitutionally  go,  none  can  fore- 
tell. Tradition  and  respectable  authority  are  opposed 
to  allowing  large  numbers  of  men  *'an  unlimited  and 
unregulated  power  of  grouping  themselves  for  a  com- 
mon purpose.""  And  yet,  experience  thus  far  would 
not  warrant  the  prophecy  that  this  legislation  will  be 
of  hostile  character.  We  have  already  observed  that 
Massachusetts  has  done  no  more  than  require  the  pub- 
lic filing  of  the  trust  declaration,  except  in  the  cases  of 
trusts  holding  securities  of  public  service  corpora- 
tions."* The  State  of  Oklahoma  has,  by  recent  legisla- 
tive enactment,  completely  recognized  and  validated 
the  business  trust  and  exempted  the  trustees  and  bene- 
ficiaries from  personal  liability  and  required  creditors 
to  look  solely  to  the  trust  estate  for  reimbursement."^ 
Again,  there  is  comfort  in  the  reflection  that  as  yet 
there  is  practically  no  other  legislation  at  all. 

Then  too,  there  are  important  inquiries  which  will 
remain  without  satisfactory  answers  until  there  shall 
be  further  adjudication.  Such,  for  example,  as  the 
precise  nature  of  the  cestui' s  interest;  to  what  extent 
the  cestuis  may  be  also  trustees;  whether  the  share- 
holders may  periodically  choose  trustees;  and  espe- 
cially a  satisfactory  guide  by  which  to  determine  pre- 


75  Holdsworth,  Hist.  E.  L.,  V.  Ill,  pp.  374,  et  seq. 

75a  Supra,  §  14,  c. 

75b  Laws  of  Oklahoma,  1919,  p.  30. 


42  Business  Trusts  as  Substitutes 

cisely  the  line  of  division  between  the  strict  trust  and 
the  partnership  or  other  relation. 

Again,  will  the  trust  violate  the  rule  against  per- 
petuities and  restraints  upon  alienation  in  the  absence 
of  peremptory  requirement  that  it  be  terminated  with- 
in the  period  of  lives  in  being  and  twenty-one  years 
and  nine  months  thereafter?  There  is  gteat  con- 
trariety of  opinion  upon  this  last  question.  The  better 
rule  would  seem  to  be  that  "where  there  are  persons 
in  being  at  the  creation  of  an  estate,  capable  of  con- 
veying an  immediate  and  absolute  estate  in  fee,  in  pos- 
session, there  is  no  suspension  of  the  power  of  aliena- 
tion and  no  question  as  to  perpetuities  can  arise.'"' 
But  since  it  cannot  be  said  that  this  is  the  established 
rule,  prudence  dictates  that  the  trust  agreement  pro- 
vide for  its  termination  within  the  period  prescribed 
by  the  rule  against  i)erpetuities.  In  this  respect  the 
corporation  would  seem  to  have  the  advantage ;  but  it 
is  an  advantage  more  seeming  than  actual,  for,  in  most 
States,  the  trust  can  be  made  to  continue  for  a  period 
of  twenty-one  years  beyond  the  death  of  the  last  sur- 
vivor of  the  youngest  of  living  children,  a  period,  we 
dare  say,  entirely  adequate  to  its  needs  and  greatly  in 
excess  of  the  customary  two-score  years  and  ten  of  the 
business  corporation. 

§  16.  Conclusions:  The  following  conclusions  are 
believed  to  be  warranted : 

1.  For  reasons  that  are  manifest,  the  express  trust 
cannot  be  used  as  a  substitute  for  public  service  cor- 
porations, or  for  corporations  carrying  on  business  of 


T6Haxt  V.  Seymour,  147  111.  598;  See  also  Johnson  t.  Preston,  226 
ni.  1.  c.  455. 


For  Business  Corporations  43 

a  public,  or  quasi-public  character,  at  all  times  requir- 
ing and  subject  to  state  regulation  and  control,  such  as 
banking  and  insurance. 

2.  The  business  trust  cannot  be  used  as  a  substitute 
for  those  corporations  with  three  stockholders,  two  of 
whom  are  dummies. 

3.  The  express  trust  has  been  used  as  an  agency  of 
business  and  trade  chiefly  in  Massachusetts  and  has 
been  so  used  there  not  as  a  substitute  for  the  corpora- 
tion but  because  the  corporation  could  not  (until  re- 
cently) be  used  in  the  field  in  which  the  trust  has  been 
principally  employed,  namely:  in  the  business  of  deal- 
ing in  real  property.  One  hundred  and  three  of  such 
trusts,  said  to  own  in  the  city  of  Boston  alone  real 
property  of  the  value  of  Two  Hundred  and  Fifty  Mil- 
lions of  Dollars,  were  investigated  in  1912  pursuant  to 
legislative  direction  by  the  Tax  Commissioner  of  that 
Commonwealth.  He  reported  as  advantages  claimed 
by  these  trusts : 

(a)  ''These  associations  have  been  found  by  the  ex- 
perience of  twenty-five  years  to  be  a  convenient,  safe 
and  unobjectionable  character  of  co-operative  owner- 
ship and  management.  They  are  for  the  interest  alike 
of  the  investor  and  the  public. 

(b)  **The  form  of  organization  ensures  a  continuity 
of  management  and  control  which  appeals  strongly  to 
investors  in  real  estate  which  cannot  be  secured  by  a 
corporation  with  changing  officers.  The  trustees,  who 
are  the  managing  officers  of  a  trust,  are  not  so  likely 
to  be  changed  as  are  the  directors  of  a  corporation. 

(c)  **It  affords  a  more  economical  and  more  con- 
venient and  flexible  form  of  management  than  does  a 


44  Business  Trusts  as  Substitutes 

corporation.     Trustees   can  transact    business    with 
more  ease  and  rapidity  than  directors. ' '" 

Nevertheless,  it  is  probable  that  at  that  time  not 
more  than  a  dozen  of  these  trusts  were  engaged  in  in- 
dustrial enterprises.^®  Thus,  it  would  seem  that  in  the 
state  where  the  business  trust  is  best  known,  its  possi- 
bilities as  a  business  agency  superior  to  the  corpora- 
tion were  either  doubted  or  not  appreciated. 

4.  The  declaration  or  agreement  of  trust  need  not 
make  the  beneficiaries  the  principals;  neither  need  it 
constitute  the  trustees,  or  the  beneficiaries,  or  both,  to- 
gether, a  partnership,  joint-stock  company  or  associa- 
tion; but,  when  properly  drafted,  it  is  a  pure  trust 
which  affords  an  agency  in  all  respects  legal  and  one 
in  principle  entirely  adequate  to  be  used  to  carry  on 
any  business  for  the  benefit  of  two  or  more  investors 
that  is  now  conducted  by  the  ordinary  manufacturing 
or  private  business  corporation.  Whether  in  practice 
it  will  constitute  such  agency,  remains  to  be  demon- 
strated by  fuller  experience  and  its  more  general  util- 
ization. 

5.  Its  employment  would  seem  to  be  ideal : 

(a)  As  a  substitute  for  holding  and  for  investment 
companies,  that  is  companies  merely  holding  the 
stock  of  corporations,  and  companies  engaged  in  the 
business  of  dealing  in,  buying  and  selling  as  invest- 
ments, stocks,  bonds  and  commercial  paper. 

(b)  As  a  substitute  for  companies  whose  business 
travels  a  beaten  path  and  is  routine  in  character,  such 
as  owning  and  conducting  an  office  or  apartment  build- 


77  Tax  Com.  Report,  House  Doc.  No.  1646. 

78  Same,  p.  19. 


Fob  Business   Corporations  45 

ing  or  hotel,  or  developing  a  subdivision,  or  doing  a 
specified  building  or  construction  work  under  a  con- 
tract, or  operating  a  mine ;  and  in  this  class  might  ap- 
propriately be  placed  also  companies  handling  large 
estates. 

6.  The  inconvenience  attendant  upon  the  necessity  of 
express  notice  and  contract  in  order  to  absolve  the 
trustees  from  liability,  is  a  practical  consideration 
tending  to  repress  its  use  in  new  ventures  and  to  con- 
fine it  to  conversions  from  the  corporate  form  of  sea- 
soned, established  and  proven  enterprises  whose 
methods  are  fixed  and  whose  risks,  with  reasonable 
certainty,  can  be  assessed. 

8.  Its  chief  advantages  over  the  corporation  are 
found  (a)  in  the  convenience,  continuity  and  flexibility 
of  the  management;  (b)  in  its  migratory  rights;  (c)  in 
its  freedom  from  visitorial  and  inquisitorial  laws  and 
the  consequent  immunity  from  the  necessity  of  making 
periodical  reports  which  disclose  its  condition  and  af- 
fairs; and  (d)  in  matters  of  taxation. 

On  the  other  hand,  disadvantages  of  a  very  practical 
nature  are  recognized  in  that  (a)  this  employment  of 
the  express  trust  is  new;  (b)  attacks  upon  its  validity 
with  new  weapons  are  yet  to  be  encountered;  (c)  regu- 
latory and  perhaps  repressive  legislation  affecting  it 
may  reasonably  be  expected;  (d)  the  precise  nature  of 
the  cestui' s  interest  remains  still  undetermined;  (e)  an 
adequate  chart  disclosing  clearly  the  line  of  demarca- 
tion between  the  domain  of  the  trust  and  that  of  the 
partnership  or  other  relation  is  yet  to  be  drawn;  (f) 
what  rights  the  beneficiaries  may  have  in  addition  to 
those  essential  to  every  cestui  que  trust,  and  whether 
they  may  periodically  choose  trustees,  or  remove  trus- 


46  Business  Trusts  as  Substitutes 

tees,  fill  vacancies,  or  even  themselves  be  trustees  if  the 
trustees  will  then  be  also  owners  of  the  majority  of 
beneficial  interests,  are  questions  still  to  be  deter- 
mined. 

Thus,  riper  practical  experience  is  essential,  and 
much  law  has  yet  to  be  made  and  many  decisions  yet  to 
be  rendered,  before  the  status  of  the  business  trust  can, 
with  entire  satisfaction,  be  known  and  defined. 


APPENDIX 


FORMS    OF    TRUST    DECLARATIONS 

THE  WACHUSETT  REALTY  TRUST. 

Prepared  hy 

Mb.  Felix  Rackemann 

of  the  Boston  Bar 

(Considered  by  the  Supreme  Court  of  the  United  States  in 
Crocker  v.  Malley,  249  U.  S.  223.) 

Know  All  Men  by  These  Presents,  That  we,  Alvah 
Crocker  and  Charles  T.  Crocker  both  of  Fitchbnrg  in 
the  Conunonwealth  of  Massachusetts,  John  J.  Riker  of 
the  City  and  State  of  New  York,  Samuel  E.  M.  Crocker 
of  said  Fitchburg,  and  Felix  Rackemann  of  Milton  in 
said  Conunonwealth,  the  grantees  named  in  a  certain 
deed  from  the  Crocker,  Burbank  &  Co.,  Inc.,  (Maine 
Corporation),  dated  this  day  by  which  deed  there  are 
conveyed  to  us  certain  lands  and  buildings  situate  in 
the  City  of  Fitchburg  in  the  Commonwealth  of  Massa- 
chusetts, hereby  declare  and  agree  that  we  will,  and 
our  heirs  and  successors  shall,  hold  said  granted  prem- 
ises, and  all  other  funds  and  property  at  any  time 
transferred  to  and  received  by  the  Trustees  hereunder, 
for  the  purposes,  with  the  powers,  and  subject  to  the 
provisions  hereof,  for  the  benefit  of  the  cestui  que 
trusts  (who  shall  be  trust  beneficiaries  only,  without 

47 


48  Business  Trusts  as  Substitutes 

partnership,  associate  or  any  other  relation  whatever 
inter  sese),  and  upon  the  trusts  following,  viz.: 

1.  In  trust  to  convert  the  same  into  money  and  dis- 
tribute the  net  proceeds  thereof  among  the  persons  at 
the  time  of  such  conversion  holding  and  owning  bene- 
ficial interests  therein,  as  evidenced  by  the  receipt  cer- 
tificates issued  by  the  Trustees  as  hereinafter  pro- 
vided; it  being  however  expressly  understood  and 
agreed  that  the  Trustees  may,  in  their  uncontrolled  dis- 
cretion, defer  or  postpone  such  conversion  and  dis- 
tribution, except  that  the  same  shall  not  be  postponed 
beyond  the  end  of  twenty  years  from  and  after  the 
death  of  the  last  survivor  of  the  persons  named  and 
described  in  the  last  paragraph  hereof.  During  such 
postponement,  and  until  such  conversion,  the  interests 
of  the  cestui  que  trusts  shall  be  considered  for  pur- 
poses of  transmission  and  otherwise  as  personal  prop- 
erty. 

2.  In  trust,  pending  final  conversion  and  distribu- 
tion of  the  property,  to  manage  and  control  the  same, 
the  Trustees  having,  for  such  purposes  and  for  all 
purposes  of  sale,  lease,  mortgage,  exchange,  improve- 
ment and  development,  and  any  and  all  arrangements, 
contracts  and  dispositions  of  the  trust  property,  or 
any  part  thereof,  all  and  as  full  discretionary  powers 
and  authority  as  they  would  have  if  they  were  them- 
selves the  sole  and  absolute  beneficial  owners  thereof 
in  fee  simple. 

3.  In  trust  to  collect  and  receive  all  rents  and  in- 
come from  the  property,  and  semi-annually  or  oftener 
at  their  convenience,  to  distribute  such  portion  thereof 
as  they  may,  in  their  discretion,  determine  to  be  fairly 
distributable  net  income,  to  and  among  the  several  ces- 
tui que  trusts  according  to  their  respective  fractional 


For  Business   Corporations  49 

interests,  the  Trustees  in  this  connection  having  full 
authority  from  time  to  time  to  use  any  funds  on  hand, 
whether  received  as  capital  or  income,  for  purposes 
of  any  repair,  improvement,  protection  or  develop- 
ment of  the  property  held  hereunder,  or  the  acquisition 
of  other  property  as  the  Trustees  may  determine  to  be 
wise  and  expedient,  for  the  protection  and  develop- 
ment of  the  trust  property  as  a  whole  pending  its  con- 
version and  distribution.  The  determinations  of  the 
Trustees,  made  in  good  faith,  as  to  all  questions  as  be- 
tween ** capital"  and  ''income"  shall  be  final. 

4.  The  said  Crocker,  Burbank  &  Co.  Inc.,  (Maine 
Company)  having  determined  to  wind  up  its  affairs 
and  be  dissolved,  without  waiting  for  final  cash  sale 
of  its  real  estate,  this  trust  is  declared  in  favor,  and  for 
the  benefit  of  the  eight  shareholders  of  said  Maine  cor- 
poration, according  to  their  respective  fractional  in- 
terests to  whom  the  Trustees  shall  issue  proper  re- 
ceipt certificates,  which  certificates,  and  all  other® 
which  may  be  hereafter  issued  in  exchange  or  substi- 
tution therefor,  shall  be  deemed  parts  hereof  and  con- 
clusive evidence  the  ownership  of  respective  interests 
in  this  trust ;  and  the  Trustees  shall,  from  time  to  time, 
on  request  (on  surrender  of  the  old)  issue  such  new 
certificates  as  may  be  proper  and  necessary  to  evidence 
any  new  or  sub-divided  interests. 

5.  The  Trustees  shall  have  authority  to  borrow  mon- 
ey and  fix  the  terms  of  any  loans,  and  give  any  pledge, 
mortgage  or  other  security  which  they  may  deem  wise. 

No  purchaser  from  or  lender  to  the  Trustees  shall 
ever  have  any  liability  to  see  to  the  application  of  any 
proceeds. 

6.  The  Trustees  may  employ  all  such  agents  and  at- 


50  Business  Trusts  as  Substitutes 

torneys  as  they  may  think  proper  and  find  expedient, 
and  prescribe  their  powers  and  duties,  and  shall  not 
be  personally  responsible  for  any  misconduct,  errors  or 
omissions  of  such  agents  or  attorneys  employed  and  re- 
tained with  reasonable  care. 

7.  The  Trustees  shall  at  all  times  keep  full  and 
proper  books  of  account  and  records  of  their  proceed- 
ings and  doings,  and  shall,  at  least  annually,  render 
account  of  the  trust  to  any  beneficiary  requesting  the 
same,  but  no  Trustees  serving  hereunder  shall  be 
obliged  to  give  any  bond,  nor  shall  any  Trustee  have 
any  liability  except  for  the  results  of  his  own  gross 
negligence  or  bad  faiths 

8.  The  recording  of  this  instrument  shall  be  at  such 
times  and  in  such  places  as  the  Trustees  may  in  their 
discretion,  determine  to  be  necessary  or  expedient, 
and  they  shall  in  like  manner  determine  the  form  and 
record  of  all  muniments  of  title. 

9.  The  Trustees  shall  have  full  power  at  any  time, 
pending  final  termination  of  this  trust,  to  transfer  the 
whole  or  any  part  of  the  property  then  held  by  them 
hereunder  to  any  corporation  which  they  may  acquire 
or  cause  to  be  organized  for  the  more  convenient  or 
expedient  holding  or  management  of  the  property,  tak- 
ing £iny  securities  issued  by  such  corporation  in  ex- 
change and  payment  therefor,  and  the  Trustees,  or 
any  of  them,  may  at  any  time  be  or  become  directors 
or  officers  of  any  corporation  any  shares  of  which  are 
held  by  them. 

10.  The  Trustees  shall  be  entitled  to  receive  reason- 
able compensation  for  service  not  exceeding  a  total  of 
one  per  cent  reckoned  upon  the  gross  income  received 
by  them  as  such,  imless,  at  any  time,  a  majority  in 


Fob  Business  Corporations  61 

interest  of  the  cestui  que  trusts  consent  in  writing  to 
some  larger  compensation  for  any  past  service.  The 
Trustees  shall  also  be  entitled  to  reimbursement  and 
indemnification  from  the  trust  property  for  all  their 
proper  expenses  and  liabilities,  and  shall  be  entitled 
at  all  times  to  the  advice  of  counsel;  and  traveling  ex- 
penses to  and  from  any  meetings  of  the  Trustees  shall 
be  considered  proper  expenses. 

11.  Any  Trustee  hereunder  may  resign  by  written 
instrument  duly  acknowledged  and  attached  to  the 
original  of  this  instrument,  or  recorded  with  Worcester 
County  (North  District)  Deeds  if  the  original  hereof 
be  then  there  recorded. 

Any  vacancy  in  the  office  of  the  Trustee,  however 
occasioned,  shall  be  filled  by  the  remaining  Trustees 
by  an  instrument  in  writing,  signed  by  them  and  as- 
sented to  in  writing,  by  the  holder  or  holders  of  a  ma- 
jority in  amount  of  the  beneficial  interests  herein,  such 
appointment  to  be  in  like  manner  attached  to  the  orig- 
inal of  this  instrument,  or  recorded  as  in  the  case  of 
resignation  last  above  provided  for. 

12.  If,  at  any  time  or  times,  a  majority  of  the  Trus- 
tees hereunder  shall  certify  in  writing  that  the  remain- 
ing Trustees  are  either  absent  from  the  Commonwealth 
of  Massachusetts  or  incapacitated  through  illness  or 
otherwise,  from  acting,  then  such  majority  shall,  at 
such  time  or  times,  have,  and  may  exercise,  any  and 
all  the  powers  of  the  Trustee  hereunder  with  like  ef- 
fect as  if  similarly  exercised  by  all. 

13.  The  terms  and  provisions  of  this  trust  may  be 
modified  at  any  time  or  times  by  instrument  in  writing, 
signed,  sealed  and  acknowledged  by  the  then  Trustees, 
assented  to  in  writing  by  a  majority  in  interest  of  the 


52  Business  Trusts  as  Substitutes 

cestui  que  trusts,  and  attached  to  the  original  of  this 
instrument,  or  recorded  with  Worcester  County  (North 
District)  Deeds  if  the  original  hereof  be  then  there 
recorded. 

14.  The  certificate  in  writing  of  the  Trustees  as  to 
any  resignation  from  the  office  of  Trustee  hereunder 
and  as  to  the  appointment  of  any  new  trustees  here- 
under and  as  to  the  existence  or  non-existence  of  any 
modifications  hereof,  may  always  be  relied  upon,  and 
shall  always  be  conclusive  evidence  in  favor  of  aU 
persons  dealing  in  good  faith  with  said  Trustees  in 
reliance  upon  such  certificate. 

15.  The  title  of  this  trust  (fixed  for  convenience) 
shall  be  ' '  The  Wachusett  Realty  Trust, ' '  and  the  term 
** Trustees"  in  this  instrument  shall  be  deemed  to  in- 
clude the  original  and  all  successor  trustees. 

16.  At  the  end  of  twenty  years  from  and  after  the 
death  of  the  last  survivor  of  said  Charles  T.  Crocker, 
Samuel  E.  M.  Crocker  and  Alvah  Crocker,  and  of  the 
lawful  issue  now  living  of  any  of  them  (unless  this 
trust  shall  heretofore  have  been  otherwise  lawfully 
terminated),  all  the  property  of  every  kind  then  held 
hereunder  shall  be  sold  by  the  Trustees  and  equitable 
distribution  made  of  the  net  proceeds  among  the  per- 
sons then  entitled. 

In  Witness  Whereof  we  have  hereunto  set  our 
hands  and  common  seal  on  this  29th  day  of  March  in 
the  year  nineteen  hundred  and  twelve. 

AiiVAH  Crockee  (Seal) 

Chaeles  T.  Crocker 
John  J.  Riker 
Feux  Rackemann 
Samuel  E.  M.  Crocker 


Fob  Business  Cobporations  53 

Commonwealth  of  Massachusetts, 

Worcester,  ss.  March  29,  1912. 

Then  personally  appeared  the  above  named  Alvah 
Crocker  and  acknowledged  the  foregoing  instrmnent  to 
be  his  free  act  and  deed. 

Before  me. 


Justice  of  the  Peace. 


Receipt  Cebtificate  Issued  Under  Foregoing  Trust. 

The  Wachusett  Realty  Trust. 
No.  (24,000) 

This  is  to  certify  that of 

is  entitled  to  twenty-four 

thousandths  of  the  net  proceeds  of  the  property  held 
under  Declaration  of  Trust  made  by  Alvah  Crocker, 
et  al,  dated  March  29,  1912,  known  as  ''The  Wachu- 
sett Realty  Trust,"  when  said  property  is  converted 
into  cash  (and  meantime  to  income),  all  as  therein 
provided.  Said  Declaration  is  recorded  with  Worcester 
County,  Mass.  (North  District)  Deeds,  and  all  the 
terms  thereof  are,  by  reference,  made  part  hereof  and 
expressly  assented  to. 

The  holder  hereof  has  no  interest,  legal  or  equitable, 
in  any  specific  property  and  the  interest  hereby  repre- 
sented can  be  transferred  only  by  due  endorsement  and 


54  Business  Trusts  as  Substitutes 

surrender  hereof  and  transfer  noted  on  the  books  kept 
for  the  purpose  by  the  Trustees,  or  their  agent. 

Alvah  Crocker 
Charles  T.  Crocker 
John  J.  Biker 
Samuel  E.  M.  Crocker 
Felix  Rackemann 

Trustees. 
^  Old  Colony  Trust  Company, 

Agent, 
by 

Dated ,  19. ..  


Indorsement  Thereupon: 
Value  received,  the  undersigned  hereby  sells,  as- 
signs and  transfers  unto of  the  frac- 
tional interests  represented  by  the  within  certificate, 

and   does   hereby   constitute   and   appoint    

true  and  lawful  attorney  irrevocable  in  the 

name  and  stead  of  the  undersigned  to  make  transfer 
accordingly  on  any  books  or  records  of  the  trustees. 


Witness . 
Dated. . , 


For  Business   Corporations  55 


TAXICAB  TRUST  ESTATE. 

(Prepared  by  the  Author.) 
This  Declaration  of  Trust,  made  at  St.  Louis,  Mis- 
souri, this day  of , 

19. .,  by  L.  Wade  Childress,  of  the  County  of  St.  Louis, 
Frank  C.  Rand,  of  the  County  of  St.  Louis,  and  Robert 
Holmes,  of  the  City  of  St.  Louis,  all  in  the  State  of 
Missouri,  Witnesseth:  That, 

Whereas,  By  deed  of  even  date  herewith,  the  Colum- 
bia Taxicab  Company,  a  corporation  of  the  City  of  St. 
Louis,  and  State  of  Missouri,  pursuant  to  votes  of  its 
directors  and  stockholders,  has  conveyed  to  the  said 
L.  Wade  Childress,  Frank  C.  Rand  and  Robert  Holmes, 
the  following  described  real  property,  lying,  being  and 
situated  in  said  City  and  State,  to-wit :  Lots  22,  23,  24, 
25,  26,  27,  28,  29,  in  block  8  of  Peter  Lindell's  First 
Addition,  and  in  block  1951  of  the  City  of  St.  Louis, 
having  an  aggregate  front  of  200  feet  on  the  north  line 
of  Lawton  avenue,  by  a  depth  northwardly  of  128  feet  6 
inches,  to  an  alley,  bounded  west  by  Channing  avenue, 
and  the  undivided  interest  of  its  stockholders  therein ; 
and 

Whereas,  The  said  Columbia  Taxicab  Company  and 
the  Yellow  Motor  Car  Company,  a  corporation  of  the 
City  of  St.  Louis,  and  State  of  Missouri,  pursuant  to 
votes  of  their  respective  directors  and  stockholders, 
have  also  conveyed,  transferred  and  delivered  to  the 
said  Childress,  Holmes  and  Rand,  by  their  separate  in- 
struments, in  writing,  of  even  date  herewith,  all  the 


56  Business  Trusts  as  Substitutes 

assets  and  property  of  said  corporations,  real,  per- 
sonal and  mixed,  of  whatsoever  kind  and  wheresoever 
situated  (except  their  respective  charters),  including 
motor  vehicles,  cabs,  automobiles,  machinery,  ma- 
terials, equipment,  office  fixtures  and  furniture,  cash  on 
hand,  accounts  receivable,  contracts,  leases,  licenses, 
privileges,  easements,  credits,  causes  of  action,  claims, 
demands,  surplus,  profits,  business,  trade  reputation, 
trade-marks,  trade  devices,  trade  names,  trade  dress 
and  style  and  trade  insignia,  and  good  will,  and  the 
undivided  interests  of  their  stockholders  therein,  and 
including,  as  to  the  Columbia  Taxicab  Company,  the 
exclusive  right  to  the  use  of  the  names  ''Columbia 
Taxicab"  and  "Columbia  Taxicab  Company"  and  in- 
cluding, as  to  the  said  Yellow  Motor  Car  Company,  the 
trade-mark  device,  trade  colors,  design,  finish,  get-up, 
dress  and  style  and  trade  insignia  of  the  said  Yellow 
Motor  Car  Company  and  its  taxicabs,  taxicab  service 
and  business,  and  the  trade  name,  "yellow  cab,"  and 
the  exclusive  right  to  the  names  "yellow  cab,"  "yellow 
taxi, "  "  yellow  motor  car, "  "  yellow  taxicab  company, ' ' 
and  "Yellow  Motor  Car  Company,"  and  the  undivided 
interests  of  its  stockholders  therein ;  and 

Whereas,  All  of  the  aforesaid  property  so  conveyed, 
transferred  and  delivered  to  the  said  Childress, 
Holmes  and  Rand,  together  with  all  other  funds  and 
property  hereafter  transferred  to  and  received  and 
acquired  by  them  hereunder,  is  to  be  held,  used  and 
managed  by  them  upon  the  trusts  herein  declared ; 

Therefore,  Know  All  Men  By  These  Presents :  That 
we,  the  aforesaid  L.  Wade  Childress,  Frank  C.  Rand 
and  Robert  Holmes  (hereinafter  called  "Trustees"), 
hereby  declare  and  agree  that  we  will,  and  our  heirs 
and  successors  shall,  hold,  use  and  manage  the  said 


Fob  Business   Corporations  57 

granted  and  conveyed  premises,  property  and  things, 
and  all  other  funds  and  property  at  any  time  trans- 
ferred to  and  received  by  the  Trustees  hereunder,  for 
the  purposes,  with  the  powers  and  subject  to  the  provi- 
sions hereof  for  the  benefit  of  the  cestui  que  trusts 
(who  shall  be  trust  beneficiaries  only,  without  part- 
nership, associate  or  any  other  relation  whatever  inter 
sese)j  and  upon  the  trusts  following,  viz.: 

(1)  In  trust  to  convert  the  same  into  money  and 
distribute  the  net  proceeds  thereof  ratably  among  the 
persons  at  the  time  of  such  conversion  holding  and 
owning  beneficial  interests  therein,  as  evidenced  by  the 
certificates  of  beneficial  interest  issued  by  the  Trustees 
as  hereinafter  provided;  it  being,  however,  expressly 
understood  and  agreed  that  the  Trustees  may,  in  their 
uncontrolled  discretion,  defer  or  postpone  such  conver- 
sion and  distribution,  except  that  the  same  shall  not 
be  postponed  beyond  the  end  of  twenty  years  from  and 
after  the  death  of  the  last  survivor  of  the  persons 
named  and  described  in  the  last  paragraph  hereof. 
During  such  postponement,  and  until  such  conversion, 
the  interests  of  the  cestui  que  trusts  shall  be  consid- 
ered for  purposes  of  transmission  and  otherwise  as 
personal  property.  , 

(2)  In  trust,  pending  final  conversion  and  distribu- 
tion of  the  property,  to  hold,  control,  manage,  use,  em- 
ploy, invest  and  reinvest,  the  same,  the  Trustees  hav- 
ing full  power  and  authority  (a)  to  pay  and  discharge 
as  such  Trustees,  but  not  personally,  the  debts  and 
obligations  of  the  said  Columbia  Taxicab  Company  and 
the  said  Yellow  Motor  Car  Company,  including  the 
deed  of  trust  now  outstanding  on  the  aforesaid  lots 
25  to  29,  defend  all  suits  now  pending,  or  that  may  be 


58  Business  Trusts  as  Substitutes 

hereafter  instituted  against  said  companies,  or  either 
of  them,  and,  as  such  Trustees,  but  not  personally,  pay 
and  perform  all  judgments  that  may  be  entered  against 
said  companies,  or  either  of  them;  (b)  to  establish, 
manage  and  carry  on  the  business  of  transporting  for 
hire  in  motor  vehicles,  automobiles,  taxicabs,  busses, 
carriages,  cabs,  wagons  and  trucks,  persons,  parcels, 
baggage,  freight,  goods  and  merchandise;  (c)  to  pur- 
chase, lease,  manufacture,  repair,  buy,  sell,  hire,  mort- 
gage and  deal  in  motor  vehicles,  automobiles,  taxicabs, 
busses,  carriages,  cabs,  wagons  and  trucks,  and  equip- 
ment for  same;  (d)  to  buy,  build,  sell,  lease,  take,  hold, 
convey,  mortgage  and  pledge  such  property,  real  per- 
sonal or  mixed,  as  may  be  necessary,  requisite  or  con- 
venient in  and  for  the  prosecution  of  said  business,  or 
as  the  interests  of  the  trust  may,  in  the  judgment  of 
said  Trustees,  from  time  to  time  require;  (e)  to  ac- 
quire and  hold  such  stocks,  shares  and  securities  of 
corporations  or  associations  as  in  their  discretion  may 
be  deemed  necessary,  or  useful,  or  advantageous  to  the 
trust,  and  the  same  to  sell  or  exchange  in  their  discre- 
tion ;  (/)  to  invest  or  loan  any  moneys  that  may  come 
into  their  hands,  in  such  manner  and  in  such  property 
or  securities,  real  and  personal,  and  wherever  situated, 
as  may  seem  to  them  to  be  advantageous,  prudent  and 
expedient;  (g)  to  begin  and  defend  legal  proceedings 
and  compromise  or  arbitrate  claims,  and  (h)  generally 
to  do  all  acts  and  things  which,  in  their  judgment,  are 
necessary,  proper,  advantageous  or  expedient  to  pro- 
mote the  complete  and  most  successful  execution  of 
this  trust  and  the  interests  of  the  cestui  que  trusts;  the 
Trustees  having  for  all  the  aforesaid  purposes  and  for 
all  purposes  of  sale,  lease,  mortgage,  exchange,  invest- 
ment and  reinvestment,  improvement  and  development. 


Fob  Business  Corporations  59 

and  any  and  all  arrangements,  contracts  and  disposi- 
tions of  the  trust  property,  or  any  part  thereof,  all  and 
as  full  discretionary  powers  and  authority  as  if  they 
were  themselves  the  sole  and  absolute  beneficial  own- 
ers thereof  in  fee  simple.  The  naming  of  any  specific 
duties  and  powers  herein  shall  not  be  construed  as  lim- 
iting the  general  powers  conferred  upon  the  Trustees. 

(3)  In  trust  to  collect  and  receive  all  rents,  income 
and  profits  from  the  property  and  from  the  conduct  of 
the  ajffairs  of  the  trust,  and  semiannually  or  oftener, 
at  their  convenience,  and  in  their  discretion,  to  dis- 
tribute such  portion  thereof  as  they  may,  in  their  dis- 
cretion, determine  to  be  fairly  distributable  net  income, 
to  and  among  the  several  cestui  que  trusts,  according 
to  their  respective  fractional  interests;  the  Trustees, 
in  this  connection,  having  full  authority,  from  time  to 
time,  to  use  any  funds  on  hand,  whether  received  as 
corpus  or  income,  for  purposes  of  any  repair,  improve- 
ment, protection  or  development  of  the  property  held 
hereunder,  or  the  business  transacted  hereunder,  or  the 
acquisition  of  other  property  as  the  Trustees  may  de- 
termine to  be  wise  and  expedient  for  the  protection  and 
development  of  the  said  trust  property  as  a  whole,  and 
the  business  and  conduct  of  the  affairs  of  the  trust 
pending  its  conversion  and  distribution.  The  deter- 
mination of  the  Trustees  made  in  good  faith  as  to  all 
question  as  between  ''corpus"  and  ** income*'  shall  be 
final. 

(4)  The  Trustees  may,  from  time  to  time,  set  apart 
(out  of  the  income  of  the  trust  property)  as  and  for  a 
surplus  fund  such  sums,  if  any,  as  they  may  think 
proper;  and  the  said  surplus  fund  shall  be  applicable 
during  the  continuance  of  the  said  trust  to  any  pur- 


60  Business  Trusts  as  Substitutes 

poses  to  which  money  from  a  part  of  the  corpus  or  in- 
come may  be  applied,  including  distribution  among  the 
several  cestui  que  trusts  as  hereinbefore,  in  paragraph 
numbered  3,  provided. 

(5)  The  said  Columbia  Taxicab  Company  and  the 
said  Yellow  Motor  Car  Company  having  determined 
to  wind  up  their  affairs  and  be  dissolved  without  wait- 
ing for  final  cash  sale  of  their  property  and  assets,  this 
trust  is  declared  in  favor  and  for  the  benefit  of  the 
stockholders  of  the  said  Columbia  Taxicab  Company, 
according  to  their  respective  fractional  interests  as  de- 
termined and  agreed  upon  by  them,  to  whom  the  Trus- 
tees shall  issue  proper  negotiable  certificates  of  bene- 
ficial interest;  said  certificates  of  beneficial  interest 
and  all  others  which  may  be  hereafter  issued  in  ex- 
change or  substitution  therefor  shall  be  deemed  parts 
hereof  and  conclusively  evidence  the  ownership  of  the 
respective  interests  in  this  trust;  and  the  Trustees 
shall,  from  time  to  time,  on  request  (or  surrender  of 
the  old),  issue  such  new  certificates  as  may  be  proper 
and  necessary  to  evidence  any  new  or  subdivided  inter- 
ests. In  case  of  the  loss,  mutilation  or  destruction  of  a 
certificate,  the  Trustees  may  issue  a  new  one  upon  such 
terms  as  they  see  fit. 

The  said  certificates  of  beneficial  interest  shall  be  in 
such  form  as  the  Trustees  deem  best,  shall  bear  the 
impress  of  their  seal,  and  shall  be  executed  either  by 
said  Trustees  themselves  or  by  their  President,  attest- 
ed by  their  Secretary. 

No  transfer  of  beneficial  interest  in  this  trust  shall 
be  binding  upon  the  Trustees,  or  affect  them  or  the 
trust  in  any  way,  unless  and  until  the  certificate  of  such 
beneficial  interest  shall  be  surrendered  to  the  Trustees 
at  their  office  in  the  City  of  St.  Louis,  Missouri,  the 


For  Business  Corpoeations  61 

transfer  thereof  noted  on  their  records  and  a  new  cer- 
tificate of  such  beneficial  interest  issued  by  them. 

(6)  It  is  not  intended  to  create  hereby  any  relation 
of  partnership  or  of  agency  among  the  Trustees,  or  be- 
tween the  Trustees  and  the  cestui  que  trusts,  or  among 
the  cestui  que  trusts,  or  between  any  or  all  of  the  cestui 
que  trusts;  but  the  title  to  every  several  item  of  the 
property  constituting  the  trust  estate  shall  be  vested 
solely  in  the  trustees;  and  the  cestui  que  trusts,  jointly 
and  severally,  shall  have  no  legal  or  equitable  title, 
right  or  interest  in  or  to  any  several  item  thereof.  The 
right  of  the  cestui  que  trusts  shall  relate  only  to  the  net 
distributable  proceeds  of  the  liquidation  of  the  trust, 
and,  meanwhile,  to  the  income  from  the  administration 
thereof. 

(7)  The  Trustees  shall  have  no  power  to  bind  the 
cestui  que  trusts  personally  by  any  act,  neglect  or  de- 
fault, and  no  cestui  que  trust  shall  be  personally  liable 
as  a  partner  or  principal,  or  otherwise,  upon  account 
of  any  express  or  implied  contract  made  by  the  Trus- 
tees, or  made  in  any  way  in  behalf  of  the  trust  estate, 
or  upon  account  of  any  tort  committed  by  the  trustees 
or  by  any  officer,  agent  or  servant  acting  under  them, 
or  in  their  behalf,  or  in  any  way  connected  with  this 
trust  or  its  administration;  but  all  cestui  que  trusts 
and  all  persons,  firms,  corporations  and  associations 
extending  credit  to,  contracting  with  or  having  any 
claim  against  the  Trustees  of  any  character  whatso- 
ever, whether  legal  or  equitable,  and  whether  arising 
out  of  contract  or  tort,  shall  look  only  to  the  funds  and 
property  of  the  trust  for  payment  or  for  indemnity,  or 
for  the  payment  of  any  debt,  damage,  judgment  or  de- 
cree, or  any  money  that  may  otherwise  become  due  or 


G2  Business  Teusts  as  Substitutes 

payable  from  the  Trustees,  so  that  neither  the  Trus- 
tees, nor  any  of  their  officers  or  agents  appointed  by 
them  hereunder,  nor  the  cestui  que  trusts,  shall  be  per- 
sonally liable  therefor.  And  every  note,  bond,  obliga- 
tion or  contract  in  writing,  made  or  given  by  the  Trus- 
tees, shall,  by  explicit  reference  to  this  declaration  of 
trust,  give  notice  of  the  limitations  upon  the  power  of 
the  Trustees,  their  officers  and  agents,  and  of  the  ex- 
emption from  personal  liability  both  of  the  Trustees 
and  the  cestui  que  trusts,  and  shall  contain  an  express 
declaration  to  the  effect  that  no  recourse  shall  be  had 
in  any  event  upon  any  Trustee,  their  officers  and  agents 
or  cestui  que  trust  and  that  the  other  contracting  party 
shall  look  only  to  the  funds  and  property  of  the  trust 
for  payment  of  any  liability  and  obligation.  Even 
though  in  any  case  the  Trustees  shall  not  give  such 
notice  to  the  other  party,  nevertheless,  such  other  con- 
tracting party  shall  have  no  recourse  against  the  Trus- 
tees, their  officers  or  agents,  or  the  cestui  que  trusts, 
but  shall  look  only  to  the  funds  and  property  of  the 
trust  for  payment  of  any  liability  and  obligation.  The 
Trustees  may  also,  at  the  cost  of  the  trust  estate,  pro- 
tect and  indemnify  themselves,  their  officers  and  agents 
and  the  trust  estate  against  damage  and  loss  with  such 
contracts  of  insurance  as  to  them  shall  seem  proper. 

(8)  The  death  of  any  cestui  que  trust  shall  not  ter- 
minate the  trust  nor  entitle  his  legal  representative  to 
claim  an  account,  or  to  take  any  action  in  the  courts,  or 
otherwise,  against  the  trust  or  the  Trustees,  but  the 
executors,  administrators  or  assigns  of  the  decedent 
shall  succeed  to  all  the  rights  of  the  decedent  under 
this  instrument  upon  producing  his  certificate  of  bene- 
ficial interest. 


Fob  Business  Corporations  63 

(9)  The  Trustees  shall  have  authority  to  spend  the 
moneys  of  the  trust  in  any  way  that,  in  their  judgment, 
will  advance  the  purposes  of  the  trust  or  assist  in  the 
improvement  and  development  of  its  business,  and  they 
may  borrow  money  either  to  pay  off  an  indebtedness  or 
to  create  funds  for  other  purposes,  and  fix  the  terms 
of  any  loan,  and  give  any  pledge,  mortgage  or  other 
security  which  they  may  deem  wise.  No  purchaser 
from  or  lender  to  the  Trustees  shall  ever  have  any 
liability  to  see  to  the  application  of  any  proceeds. 

(10)  Every  Trustee,  in  his  individual  capacity,  or 
in  any  other  fiduciary  capacity,  may  purchase,  hold  and 
own  beneficial  interests  m  this  trust  in  all  respects  as  if 
he  were  not  a  Trustee,  and  may  purchase  at  public 
auction  any  real  estate  or  personal  property  offered 
for  sale  by  the  Trustees. 

(11)  The  Trustees  may  employ  all  such  servants, 
agents  and  attorneys  as  they  may  think  proper  and 
find  expedient,  and  prescribe  their  powers  and  duties, 
and  shall  not  be  personally  responsible  for  any  mis- 
conduct, errors  or  omissions  of  such  servants,  agents 
or  attorneys  employed  and  retained  with  reasonable 
care. 

(12)  The  Trustees  shall  at  all  times  keep  full  and 
proper  books  of  account  and  records  of  their  proceed- 
ings and  doings,  and  shall,  at  least,  annually,  render 
account  of  the  trust  to  any  beneficiary  requesting  the 
same;  but  no  Trustee  serving  hereunder  shall  be  re- 
quired to  give  any  bond,  nor  shall  any  Trustee  have 
any  liability  one  for  another,  or  for  anything  except 
for  the  result  of  his  own  gross  negligence  or  bad  faith. 

(13)  All  written  conveyances  of  real  property,  at 


64  Business  Trusts  as  Substitutes 

whatever  time  taken  by  the  Trustees  as  such,  shall 
name  as  grantees  all  the  Trustees  and  shall  designate 
them  as  Trustees  under  this  Declaration  of  Trust,  re- 
ferring to  the  same  by  its  book  and  page  record  in  the 
office  of  the  Eeecorder  of  Deeds  of  the  City  of  St. 
LfOuis. 

(14)  The  Trustees  shall  have  full  power  at  any 
time,  pending  final  termination  of  this  trust,  to  trans- 
fer the  whole  or  any  part  of  the  property  then  held 
by  them  hereunder  to  any  corporation  which  they  may 
acquire,  or  cause  to  be  organized,  for  the  more  con- 
venient or  expedient  holding  or  management  of  the 
trust  or  the  conduct  of  the  business  of  the  trust,  taking 
any  securities  issued  by  such  corporation  in  exchange 
and  payment  therefor,  and  the  Trustees,  or  any  of 
them,  may,  at  any  time,  be  or  become,  and  vote  for 
themselves  to  be  or  become,  directors  or  officers,  with 
remuneration  or  salary,  in  any  corporation,  any  shares 
of  which  are  held  by  them. 

(15)  If,  and  when,  the  Trustees  shall  have  occasion 
to  apply  to  any  court  of  competent  jurisdiction  for  di- 
rection as  to  their  powers,  duties  and  obligations,  they 
need  not  notify  the  cestui  que  trusts,  or  make  any  of 
them  parties  to  any  such  proceeding ;  but  the  said  Trus- 
tees may  apply  for,  and  receive,  such  direction  without 
any  notice  to  the  cestui  que  trusts,  who  shall  be  as  con- 
clusively bound  thereby  as  though  they  had  been  noti- 
fied and  made  parties  to  the  proceeding. 

(16)  Any  Trustee  hereunder  may  resign  by  written 
instrument  duly  acknowledged  and  attached  to  the 
original  of  this  instrument,  and  recorded  in  the  office 
of  the  Recorder  of  Deeds  of  the  City  of  St.  Louis,  Mis- 
souri. 


For  Business  Corporations  65 

Any  vacancy  in  the  office  of  trustee,  however  occa- 
sioned, shall  be  filled  by  the  remaining  Trustees  by  an 
instrument  in  writing,  signed  and  acknowledged  by 
them,  and  attached  to  the  original  of  this  instrument 
and  recorded,  as  in  the  case  of  resignation  last  above 
provided  for.  A  Trustee  so  appointed  shall  have  all 
the  powers  and  duties  of  his  predecessor.  The  acting 
Trustees  for  the  time  being,  whether  surviving  or  re- 
maining, shall  have  all  the  powers  and  discretions  of 
the  original  Trustees.  The  title  of  the  outgoing  Trus- 
tee shall  vest  in  the  remaining  Trustees,  and,  upon  the 
filling  of  any  vacancy,  the  title  to  the  whole  trust  prop- 
erty shall  vest  jointly  in  those  who  shall  then  be  Trus- 
tees hereunder.  Any  Trustee  may,  by  power  of  attor- 
ney, delegate  his  powers  for  a  period  not  exceeding  six 
months  at  any  one  time  to  any  other  Trustee  or  Trus- 
tees hereunder. 

(17)  Any  two  of  the  Trustees  concurring  and  act- 
ing jointly  may  do  anything  that  is  within  the  power  of 
the  Trustees,  save  as  expressly  herein  otherwise  pro- 
vided. If  two  of  the  Trusteeships  shall  be  vacant,  or  if 
one  be  vacant  and  one  of  the  remaining  Trustees  be,  for 
any  reason,  temporarily  unable  to  act,  or,  if  without  a 
vacancy,  two  of  the  Trustees  be  for  any  reason  tem- 
porarily unable  to  act,  the  other  Trustee,  acting  alone, 
may  do  such  things  and  only  such  things  as  are  neces- 
sary for  the  preservation  of  the  trust  and  its  adminis- 
tration in  regular  routine.  But  all  vacancies  shall  be 
filled  as  soon  as  practicable  after  their  occurrence,  and 
the  power  of  a  single  Trustee  to  act  shall  be  treated  as 
an  emergency  power  whose  exercise  is  to  be  temporary, 
rare  and  as  brief  as  possible. 

(18)  The  certificate  in  writing  of  the  Trustee  as  to 


66  Business  Trusts  as  Substitutes 

any  resignation  from  the  office  of  Trustee  hereunder, 
and  as  to  the  appointment  of  any  new  Trustees  here- 
under, and  as  to  the  existence  or  non-existence  of  any 
modifications  hereof,  and  as  to  the  authorization  of  a 
particular  act  to  be  done,  may  always  be  relied  upon 
by,  and  shall  always  be  conclusive  evidence  in  favor  of, 
all  persons  dealing  in  good  faith  with  said  Trustees  in 
reliance  upon  such  certificate. 

(19)  The  Trustees  shall  be  entitled  to  receive  as 
compensation  for  their  services  the  sum  of  one  dollar 
per  year  each,  except  that  the  Trustee  who  shall  also 
be  President  shall  receive  such  reasonable  salary  as  the 
other  Trustees  shall,  from  time  to  time,  determine  and 
fix. 

The  Trustees  shall  also  be  entitled  to  reimbursement 
and  indemnification  from  the  trust  property  for  all 
their  proper  expenses  and  liabilities,  and,  if  any  Trus- 
tee shall  be  adjudged  personally  responsible  for  any 
obligation,  he  shall  be  entitled  to  have  such  responsi- 
bility discharged  in  the  first  instance  by  the  trust  prop- 
erty without  himself  discharging  the  same;  and  the 
Trustees  shall  be  entitled  at  all  times  to  the  advice  and 
service  of  counsel,  and  traveling  expenses  to  and  from 
any  meetings  of  the  Trustees  shall  be  considered 
proper  expenses. 

(20)  The  title  of  this  trust  (fixed  for  convenience) 
shall  be  Taxicab  Trust  Estate  and  it  may  deal  and  be 
dealt  with  by  said  title  and  also  in  the  names  of  its 
Trustees.  Said  title  may  be  changed  and  a  new  title 
selected  from  time  to  time  by  the  Trustees  by  instru- 
ment signed  and  acknowledged  by  all  of  the  Trustees 
and  attached  to  this  declaration  of  trust  and  recorded 


For  Business   Corporations  67 

in  the  office  of  the  Recorder  of  Deeds  of  the  City  of  St, 
Louis,  Missouri. 

The  term  ** Trustees"  in  this  Declaration  of  Trust 
shall  be  deemed  to  include  the  original  and  all  suc- 
cessor Trustees. 

(21)  The  Trustees  shall  annually  elect  from  among 
their  number  a  President  and  a  Vice-President,  and 
shall  also  elect  from  among  their  number,  or  otherwise, 
a  Secretary  and  a  Treasurer,  and  such  other  officers  as 
they  may  deem  advisable,  and  prescribe  their  powers 
and  duties.  The  offices  of  Secretary  and  Treasurer 
may  be  filled  by  the  same  person. 

(22)  The  Trustees  may  adopt  and  use  a  common 
seal. 

(23)  The  terms  and  provisions  of  this  trust  may 
be  amended,  modified  or  added  to  (except  as  regards 
the  liability  of  the  Trustees  and  the  cestui  que  trusts), 
at  any  time  or  times,  by  instrument  in  writing  signed, 
sealed  and  acknowledged  by  all  the  then  Trustees,  and 
assented  to  in  writing  by  two-thirds  in  interest  of  the 
cestui  que  trusts,  and  attached  to  the  original  of  this 
instrument  and  recorded  in  the  office  of  the  Recorder 
of  Deeds  in  and  for  the  City  of  St.  Louis,  Missouri. 

(24)  This  Declaration  of  Trust  and  all  amendments 
and  modifications  thereof  and  additions  thereto  shall 
be  recorded  in  the  office  of  the  Recorder  of  Deeds  in 
and  for  the  City  of  St.  Louis,  and  State  of  Missouri, 
and  in  such  other  places  as  the  Trustees  may,  in  their 
discretion,  from  time  to  time,  determine  to  be  neces- 
sary or  expedient. 

(25)  At  the  end  of  twenty  years  from  and  after  the 
death  of  the  last  survivor  of  the  said  L.  Wade  Chil- 


68  Business  Trusts  as  Substitutes 

dress,  Frank  C.  Rand  and  Robert  Holmes  (unless  this 
trust  shall  theretofore  have  been  otherwise  lawfully 
terminated),  all  the  property  of  every  kind  then  held 
hereunder  shall  be  sold  by  the  Trustees  and  equitable 
distribution  made  of  the  net  proceeds  among  the  per- 
sons entitled  thereto. 

In  Witness  Whereof,  we  have  hereunto  set  our  hands 

and  seal  on  this   day  of   

in  the  year  nineteen  hundred  and 

(Seal) 

(Seal) 

(Seal) 


ss. 


State  of  Missouri,  ) 
City  of  St.  Louis.    ) 

On  this day  of 


A.  D.  19. .,  before  me,  the  undersigned,  Notary  Public 
within  and  for  the  City  and  State  aforesaid,  personally 
appeared  L.  Wade  Childress,  Frank  C.  Rand  and  Rob- 
ert Holmes,  to  me  personally  known  to  be  the  persons 
whose  names  are  subscribed  to  the  foregoing  instru- 
ment, and  each  acknowledged  to  me  that  he  executed 
the  same  as  his  free  act  and  deed  for  the  purposes  and 
considerations  therein  expressed. 

In  Witness  Whereof,  I  have  hereunto  set  my  hand 
and  affixed  my  official  seal  the  day  and  year  last  afore- 
said. 

My  commission  expires 

Notary  Public. 


For  Business   Corporations  69 

Certificate  of  Beneficial  Interest  Issued  Under 

Foregoing. 

Certificate  Fractional  Interest 

No.  "        

SOOOths 
Taxicab  Trust  Estate. 

This  Is  to  Certify  That of 

is  entitled  to  five  thou- 
sandths of  the  net  proceeds  of  the  property  held  under 
Declaration  of  Trust  made  by  L.  Wade  Childress, 
Frank  C.  Band  and  Robert  Hoknes,  dated  December 
31,  1919,  known  as  Taxicab  Trust  Estate  when  said 
property  is  converted  into  cash  and  meanwhile  to  in- 
come, all  as  therein  provided.  Said  Declaration  is 
recorded  in  the  oJBfice  of  the  Recorder  of  Deeds  of  the 
City  of  St.  Louis,  Missouri,  in  Book  3294,  page  22,  and 
all  the  terms  thereof  are  by  reference  made  part  here- 
of and  expressly  assented  to. 

The  holder  hereof  has  no  interest,  legal  or  equitable, 
in  any  specific  property  and  the  interest  hereby  repre- 
sented can  be  transferred  only  by  due  endorsement  and 
surrender  hereof  and  transfer  noted  on  the  books  kept 
for  the  purpose  by  the  Trustees,  or  their  agent. 

In  Witness  Whereof,  The  said  Trustees  have  here- 
unto set  their  hands  and  caused  their  seal,  duly  at- 
tested by  their  Secretary,  to  be  impressed  hereupon 
this  first  day  of  January,  1920. 
(Seal)  L.  W.  Childress, 

Frank  C.  Rand, 
Robert  Holmes, 

Trustees. 
J.  C.  Maguire,  Secretary. 


70  Business  Trusts  as  Substitutes 


Endorsements  Thereupon. 

For  Value  Received  the  undersigned  hereby  sells, 

assigns  and  transfers  unto , 

of  the  fractional  interests  represented  by  the 

within  certificate,  and  does  hereby  constitute  and  ap- 
point   true  and  lawful  attorney  irre- 
vocable in  the  name  and  stead  of  the  undersigned  to 
make  transfer  accordingly  on  any  books  or  records  of 
the  Trustees. 

Dated ,19... 


Witness 


Fob  Business   Corporations  71 

ST.  LOUIS  HOME  OWNERS'  ASSOCIATION. 

Prepared  by 
Mr.  Tom  W.  Bennett, 

President  Mortgage  Trust  Company  of  St.  Louis,  As  Chair- 
man of  Special  Committee  of  St.  Louis  Chamber 
of  Commerce. 

This  Agreement  made  this day  of  June,  1919, 

by  and  between  ,  herein  designated 

as  subscribers,  and    ,  herein  desig- 
nated as  Trustees,  witnesseth : 

Whereas,  The  subscribers  have  created  a  fund  of 
One  Million  Dollars  ($1,000,000.00)  for  the  purpose  of 
enabling  wage-earners  to  own  their  own  homes  and  to 
create  better  housing  conditions  in  St.  Louis  and  St. 
Louis  County,  Missouri,  they  do  hereby  assign,  trans- 
fer and  deliver  to  above-named  Trustees,  under  the 
designation  of  the  St.  Louis  Home  Owners'  Associa- 
tion, said  fund  and  any  increase  thereof  in  trust  as 
hereinafter  set  out. 

1.  The  Trustees  in  their  collective  capacity  shall  be 
designated  as  far  as  practicable  as  the  St.  Louis  Home 
Owners '  Association,  and  under  that  name  shall,  as  far 
as  practicable,  conduct  aU  business,  and  execute  all  in- 
struments in  writing  in  performance  of  their  trust. 

2.  The  Trustees  shall  be  fifteen  (15)  in  number,  and 
the  persons  selected  and  named  as  Trustees  herein- 
above shall  hold  office  until  the  first  Tuesday  of  June, 
1920,  at  which  time,  at  the  annual  meeting  of  the  share- 
holders, a  new  Board  of  Trustees  shall  be  selected  by 
the  shareholders,  five  (5)  of  whom  shall  be  elected  to 
serve  for  one  year;  five  (5)  for  two  years;  and  five  (5) 


72  Business  Tkusts  as  Substitutes 

for  three  years,  and  thereafter  on  each  first  Tuesday 
in  June,  five  (5)  Trustees  shall  be  elected,  to  serve  for 
a  term  of  three  years  and  until  their  successors  are 
elected  and  qualified. 

Any  or  all  of  the  members  of  the  above-named  Board 
of  Trustees  shall  be  eligible  for  re-election  to  the  Board 
at  the  meeting  of  the  shareholders  on  the  first  Tuesday 
of  June,  1920,  and  thereafter. 

In  case  of  death,  resignation  or  inability  to  act  of 
any  of  the  Trustees,  the  remaining  Trustees  shall  fill 
the  vacancy  until  the  next  annual  meeting  of  the  share- 
holders and  at  such  annual  meeting  the  shareholders 
shall  elect  a  trustee  or  trustees  to  fill  the  vacancy  or 
vacancies  for  the  remainder  of  the  unexpired  term. 
As  soon  as  any  trustee  elected  by  the  shareholders,  or 
by  the  remaining  trustees,  to  fill  a  vacancy  shall  have 
accepted  the  trust,  the  trust  estate  shall  vest  in  the  new 
trustee  or  trustees  without  any  further  act  or  convey- 
ance. 

Upon  the  election  of  any  trustee,  either  by  the  re- 
maining trustees  or  by  the  shareholders  to  fill  a  va- 
cancy, he  shall  forthwith  execute  a  written  acceptance 
of  this  trust,  which  shall  be  filed  with  the  secretary  of 
the  company. 

3.  The  home  ofiice  of  the  company  shall  be  in  the 
City  of  St.  Louis,  Mo. 

4.  The  Trustees  are  authorized,  in  the  name  of  the 
company,  to  purchase  materials,  employ  labor,  to  pur- 
chase, hold,  own,  convey,  lease,  mortgage  or  otherwise 
dispose  of  real  estate  and  personal  property.  The 
Trustees  are  authorized  to  do  all  things  necessary  and 
desirable  or  incidental  that  may  be  required  to  carry 
out  the  purposes  for  which  this  trust  is  formed.  Any 
written  instrument  conveying,  leasing,  mortgaging  real 


Foe  Business  Corporations  73 

estate  or  personal  property  may  be  executed  in  the 
name  of  the  company  by  the  President  and  counter- 
signed by  the  Secretary  when  authorized  by  the  Board 
of  Trustees. 

Said  Trustees  may  loan  trust  funds  herein  provided 
for  to  wage-earners  at  the  rate  not  to  exceed  6  per  cent, 
and  for  a  term  of  years  not  to  exceed  fifteen,  and  not 
more  than  $5,000  shall  be  loaned  to  any  one  individual. 
Loans  shall  be  made  only  to  wage-earners  for  the  pur- 
chase of  homes  in  which  they,  themselves,  shall  live. 
But  no  borrowers  shall  be  charged  any  commission  or 
brokerage  of  any  kind. 

The  Trustees  may  make  provisions  for  cancellation 
of  the  debt  in  case  of  death  or  total  disability  of  the 
wage-earner,  and  for  compensation  in  the  case  of  ill- 
health.  The  monthly  payments  made  by  the  wage- 
earners  in  re-payments  of  said  loans  shall  include  taxes 
and  insurance  which  shall  be  paid  by  the  company. 

5.  The  Trustees  shall  have  authority  to  adopt  and  use 
a  common  seal,  and  make  such  contracts  as  they  may 
deem  expedient  in  the  conduct  of  the  business  of  the 
trust;  to  collect,  sue  for,  receive  and  receipt  for  all 
moneys  at  any  time  becoming  due  to  said  trust ;  to  be- 
gin, prosecute,  defend  or  settle  suits  at  law,  in  equity 
or  elsewhere  in  the  name  of  the  St.  Louis  Home  Own- 
ers Association,  and  to  compromise  or  refer  to  arbitra- 
tion any  claim  in  favor  of  or  against  said  trust ;  from 
time  to  time  to  lease,  sell,  exchange,  or  otherwise  dis- 
pose of  at  public  or  private  sale,  any  or  all  of  the  trust 
property,  real  or  personal,  for  such  prices  either  in 
cash  or  the  stocks,  shares  or  securities  of  other  cor- 
porations, trusts  or  companies,  and  upon  such  terms  as 
to  credit  or  otherwise  as  they  may  deem  expedient. 

6.  The  trust  herein  created  shall  not  be  operated 


74  Business  Trusts  as  Substitutes 

for  profit,  and  the  returns  to  the  subscribers  of  the 
trust  fund  shall  not  exceed  five  per  cent  per  annum.  In 
the  event  the  net  profits  of  the  trust  shall  amount  to 
more  than  five  per  cent,  the  excess  profits  over  and 
above  5  per  cent  as  aforesaid,  shall  be  used  in  further- 
ance of  the  objects  for  which  this  trust  is  formed. 

No  salaries  shall  be  paid  to  any  member  of  the  Board 
of  Trustees  unless  he  may  be  called  upon  to  perform 
work  which  in  the  opinion  of  the  Trustees  requires  the 
granting  of  compensation;  all  compensation  to  em- 
ployes shall  be  fixed  by  the  Board  of  Trustees. 

7.  The  trust  fund  of  $1,000,000.00  is  hereby  made 
the  capital  stock  of  the  St.  Louis  Home  Owners '  Asso- 
ciation, divided  into  10,000  shares  of  the  par  value  of 
$100  each.  As  evidence  of  the  ownership  of  said  shares, 
the  Trustees  shall  cause  to  be  issued  to  each  share- 
holder a  negotiable  certificate,  to  be  signed  by  such 
ofiicer  or  agent  as  the  Trustees  may  direct  and  by  at 
least  one  of  the  trustees. 

The  shares  shall  be  transferable  by  assignment  in 
writing  and  upon  surrender  of  the  certificates  therefor, 
but  no  such  transfer  shall  be  of  any  effect  as  regards 
the  Trustees  until  it  has  been  recorded  upon  the  books 
of  the  company  kept  for  that  purpose. 

In  case  of  loss  or  destruction  of  any  certificate  of 
shares  the  Trustees  may,  under  such  conditions  as  they 
may  deem  expedient,  issue  a  new  certificate  or  certifi- 
cates in  place  of  those  lost  or  destroyed. 

8.  So  far  as  strangers  to  this  trust  are  concerned, 
a  resolution  of  the  Trustees  authorizing  a  particular 
act  to  be  done,  shall  be  conclusive  evidence  in  favor  of 
such  strangers  that  such  act  is  within  the  powers  of  the 
Trustees,  and  no  purchaser  from  the  Trustees  or  one 
loaning  money  to  the  Trustees,  or  borrowing  from  the 


Fob  Business   Corporations  75 

Trustees,  shall  be  bound  to  see  to  the  application  of  the 
purchase  or  loaned  money  or  other  consideration  paid 
or  delivered  to  or  for  the  said  purchasers  or  loaned  to 
or  by  said  Trustees. 

Stated  meetings  of  the  Trustees  shall  be  held  at 
least  once  every  month,  and  other  meetings  shall  be 
held  from  time  to  time  upon  call  of  any  officer  or  Trus- 
tee. A  majority  of  the  Board  of  Trustees  present  at 
any  special  or  called  meeting  shall  constitute  a  quorum, 
and  the  concurrence  of  all  the  Trustees  shall  not  be 
necessary  to  the  validity  of  any  act  done  by  them,  but 
the  ^vish  of  the  majority  of  the  Trustees  present  and 
voting  at  any  meeting  shall  be  binding. 

The  Trustees  may  make,  adopt,  amend  or  repeal 
such  by-laws  and  regulations  not  inconsistent  with  the 
terms  of  this  instrument  as  they  may  consider  neces- 
sary or  desirable  for  the  conduct  of  the  business  or  for 
the  government  of  themselves,  their  agents  and  repre- 
sentatives. 

The  Trustees  may  elect  annually  from  among  their 
a  number  a  President  and  Vice-President,  and  may 
also  elect  from  among  their  number  or  otherwise,  a 
Treasurer,  Secretary,  Manager,  General  Counsel  and 
other  professional  advisors,  which  officers  shall  have 
the  authority  and  duties  usually  incident  to  like  offi- 
cers in  a  corporation,  or  such  duties  as  the  Trustees 
may  designate.  The  Trustees  may  combine  the  duties 
and  authority  of  two  or  more  officers  in  one  person. 
They  shall  also  have  authority  to  elect  temporary  offi- 
cers to  serve  during  the  absence  or  disability  of  reg- 
ular officers.  The  Trustees  may  employ  such  other  em- 
ployees, agents  or  representatives  as  may  be  necessary 
for  the  proi)er  conduct  of  the  trust. 

9.    The  Trustees  shall  not  be  liable  for  any  error  of 


76  BusixEss  Trusts  as  Substitutes 

judgment,  or  for  any  loss  arising  out  of  any  act  or 
omission  to  act  in  the  execution  of  this  trust,  so  long 
as  they  act  in  good  faith,  nor  shall  they  be  personally 
liable  for  the  acts  and  omissions  of  each  other,  or  for 
the  acts  and  omissions  of  any  officer,  agent  or  repre- 
sentative elected  or  appointed  by  them  or  acting  for 
them,  and  they  shall  not  be  obliged  to  give  bond  to 
secure  the  due  performance  by  them  of  this  trust. 

Any  Trustees  may  acquire,  own  and  dispose  of 
shares  in  this  trust  to  the  same  extent  as  if  he  were  not 
a  Trustee. 

10.  Shares  hereunder  shall  carry  only  the  rights 
specifically  set  forth  in  this  instrument  and  in  the  cer- 
tificates thereof.  The  death  of  a  shareholder  or  a 
Trustee  during  the  continuance  of  the  trust  shall  not 
operate  to  determine  the  trust,  nor  shall  it  entitle  the 
legal  representative  of  the  deceased  to  an  accounting, 
or  to  take  action  in  the  courts  or  elsewhere  against  the 
Trustees ;  but  the  executors,  administrators  or  assigns 
of  any  deceased  shareholder  shall  succeed  only  to  the 
rights  of  said  decedent  under  this  trust,  upon  the  sur- 
render of  the  certificates  for  the  shares  held  by  him. 

The  ownership  of  the  shares  hereunder  shall  not  en- 
title the  shareholder  to  any  title  in  or  to  the  trust 
property  whatsoever,  or  right  to  call  for  a  partition  or 
division  of  the  same,  or  for  an  accounting,  or  for  any 
voice  or  control  whatever  in  the  management  of  said 
property  or  of  the  business  connected  therewith,  ex- 
cept to  participate  in  the  elections  of  the  Trustees  as 
herein  provided. 

11.  The  Trustees  shall  have  no  power  to  bind  the 
shareholders  personally.  All  persons,  trusts,  or  cor- 
porations extending  credit  to,  contracting  with,  or  hav- 
ing claims  against  the  Trustees,  shall  only  look  to  the 


For  Business   Cobporations  77 

funds  and  property  of  the  trust,  for  the  payment  of 
any  such  contract  or  claim,  or  for  the  payment  of  any 
debts,  damages,  judgments  or  decree,  or  of  any  money 
that  may  otherwise  become  due  and  payable  to  them 
from  the  Trustees,  so  that  neither  the  Trustees,  share- 
holders nor  officers,  present  or  future,  shall  be  per- 
sonally liable  therefor. 

In  every  written  order,  contract  or  obligation  which 
the  Trustees  shall  give,  authorize  or  enter  into,  it  shall 
be  the  duty  of  the  Trustees  to  stipulate,  or  cause  to  be 
stipulated,  that  neither  the  Trustees  nor  the  sharehold- 
ers shall  be  personally  responsible  therefor  under  or 
by  reason  of  such  order,  contract  or  obligation. 

12.  The  Trustees  shall,  in  the  building  of  homes, 
give  due  consideration  to  the  recommendations  or  re- 
quests of  the  subscribers  hereto,  and  priority  where,  in 
their  opinion,  the  best  interests  of  the  trust  seem  to  re- 
quire the  same. 

13.  The  wage-earners  borrowing  for  the  purpose  of 
purchasing  homes  as  aforesaid,  shall,  as  far  as  prac- 
ticable, collectively  be  entitled  to  representation  upon 
the  Board  of  Trustees. 

14.  This  trust  shall  not  continue  in  any  event  longer 
than  for  term  of  twenty  (20)  years,  at  which  time  the 
then  Board  of  Trustees  shaU  proceed  to  wind  up  its 
affairs,  liquidate  its  assets,  and  distribute  the  same 
among  the  holders  of  the  shares,  provided,  however, 
that  if,  prior  to  the  expiration  of  said  period  the  hold- 
ers of  at  least  two-thirds  of  the  shares  then  outstand- 
ing shall,  at  a  meeting  called  for  that  purpose,  vote  to 
terminate  or  continue  this  trust,  then  the  said  trust 
shall  either  terminate  or  continue  in  existence  for  such 
further  period  as  may  then  be  determined.  For  the 
purpose  of  winding  up  the  affairs  and  liquidating  the 


78  Business  Trusts  as  Substitutes 

assets  of  the  trust  the  then  Board  of  Trustees  shall 
continue  in  oflSce  until  such  duties  have  been  fully  per- 
formed. 

15.  This  agreement  and  declaration  of  trust  may  be 
amended  or  altered  in  any  particular  whatever,  except 
as  regards  the  liability  of  the  Trustees,  at  any  annual 
or  special  meeting  of  the  shareholders  with  the  consent 
of  the  holders  of  at  least  two-thirds  of  the  shares  then 
outstanding,  provided  ten  days '  notice  of  the  proposed 
amendment  or  alteration  shall  have  been  given  in  writ- 
ing in  the  call  for  the  meeting,  and  in  the  case  of  the 
adoption  of  such  amendment  or  alteration,  the  same 
shall  only  become  effective  when  it  has  been  certified 
by  the  chairman  of  the  meeting  which  voted  it,  counter- 
signed by  at  least  two  of  the  then  Board  of  Trustees  in 
token  of  the  acceptance  by  said  Board  of  Trustees  of 
said  amendment  or  alteration  as  an  added  or  altered 
part  of  their  trust,  then  attached  to  and  made  a  part  of 
this  agreement  and  a  copy  thereof,  with  the  Secre- 
tary's certificate  attached  as  aforesaid,  filed  with  the 
office  or  official  having  custody  of  the  duplicate  of  this 
instrument. 

In  Witness  Whereof,  etc. 


Fob  Business   Coeporatioxs  79 


AGREEMENT  AND  DECLARATION  OF  TRUST 
OF  THE  COMPANY. 

(Prepared  by  member  of  Chicago  Bar  whose  name  the  author  has 
been  unable  to  learn.) 

This  Agreement,  made  this day  of 

A.  D.  19. . ,  between ,  des- 
ignated as  the  Subscriber,  and , 

and    ,    together   with 

their  successors,  herein  designated  as  the  Trustees,  wit- 
nesseth : 

That  Whereas,  the  Subscriber  proposes  to  transfer, 
assign  and  deliver  to  the  Trustees,  under  the  designa- 
tion of  the Company,  certain  proper- 
ties, as  shown  in  '*  Schedule  A"  identified  by  the  signa- 
tures of  the  parties  hereto  and  filed  with  the  Trustees ; 
and  the  Trustees  for  the  purpose  of  defining  the  inter- 
est of  the  Subscriber  and  his  assigns  in  such  property, 
have  agreed  to  issue  to  the  Subscriber,  negotiable  cer- 
tificates representing  Beneficial  Interests,  or  shares, 
in  and  to  the  Trust  Estate  herein  created,  to  the  amount 
of ( )  Common  Beneficial  In- 
terests ;  each  Interest  to  be  of  the  expressed  par  value 
of ( )  Dollars,  the  same  be- 
ing fully  paid  and  non-assessable,  and  are  transfer- 
able on  the  books  of  the  Trustees  in  accordance  with 
the  terms  of  this  instrument. 

Now,  Therefore,  the  Trustees  hereby  declare  that 
they  will  hold  said  property  to  be  transferred  to  them 
as  well  as  all  other  property  which  they  may  acquire 
as  Trustees,  together  with  the  proceeds  and  profits 
thereof,  in  trust;  to  manage  and  dispose  of  the  same 


80  Business  Trusts  as  Substitutes 

for  the  benefit  of  the  holders  from  time  to  time,  of  cer- 
tificates issued  hereunder,  and  in  the  manner  and  sub- 
ject to  the  stipulations  herein  contained,  towit : 

First :  That  whenever  the  term  ' '  Trustees ' '  is  used 
herein,  it  shall  refer  to  and  include  the  above  Trustees, 
and  also  any  successors  in  trust,  appointed  under  the 
terms  hereof.    That  whenever  the  term  "Company" 

is  used  herein,  it  shall  be  deemed  to  refer  to  said 

Company,  being  the  designation,  so  far  as 

practicable,  of  the  said  Board  of  Trustees  and  their 
successors  in  trust,  in  their  collective  capacity,  under 
the  terms  hereof.  That  whenever  the  term  "Certifi- 
cate Holder"  is  used  herein  it  shall  be  deemed  to  mean 
the  owner  of  a  certificate  evidencing  one  or  more  Bene- 
ficial Interests,  of  the  par  value  of 

Dollars  ($ )  each,  in  and  to  the  Trust  Estate 

herein  mentioned  the  legal  title,  ownership  and  control 
of  which  estate  is  vested  in  said  Trustee;  and  that 
whenever  the  term  "Certificate"  is  used  herein,  it  shall 
be  deemed  to  mean  an  instrument  in  writing,  or  printed 
or  partly  written  and  printed,  issued  by  said  Trustees, 
evidencing  the  ownership  of  an  equitable  interest  in 
said  estate  of  one  or  more  -beneficial  interests,  as  may 
therein  be  stated. 

(b)     The  Trustees,  in  their  collective  capacity,  shall 

be  designated,  so  far  as  practicable,  as  the  

Company,  and  under  that  name  shall,  so  far 

as  practicable,  conduct  all  business  and  execute  all  in- 
struments in  writing,  in  performance  of  their  trust. 

Second:  The  Trustees  do  hereby  acknowledge  the 
receipt  by  them  of  the  property  aforementioned,  and  it 
is  expressly  agreed  that  the  said  property,  as  well  as 
any  other  which  may  hereafter  be  acquired  by  the 
Trustees  for  the  purpose  herein  mentioned  under  the 


Foe  Business  Corporations  81 

terms  hereof,  shall  be  received  by  the  Trustees,  and 
shall  be  by  them  held,  owned,  controlled,  managed,  and 
applied  to  the  uses  and  purposes  herein  mentioned,  and 
to  no  other. 

(b)  That  the  money,  or  property,  together  with  the 
income  and  issues  thereof  received  or  acquired  by  the 
said  Trustees  under  the  terms  hereof,  shall  constitute 
and  be  held,  kept  and  used  by  them  as  a  Trust  Estate 
for  the  use  and  benefit  of  the  Certificate  Holders  in  the 
said  estate,  and  that  the  said  Trustees  are  authorized, 
empowered  and  directed  to  apply  the  said  money  or 
property  or  the  proceeds,  the  increase  or  income  there- 
of, constituting  said  Trust  Estate,  as  follows,  towit: 

(c)  Here  state  the  particular  line  of  business  to  be 
followed. 

(d)  Make  further  amplifications  and  specifications 
of  paragraph  (c). 

(e)  To  enter  into,  apply  for,  purchase  or  otherwise 
acquire  any  franchises,  contracts  or  concessions  for  or 
in  relation  to  the  construction,  execution,  carrying  out, 
equipment,  improvement,  administration,  management 
or  control  of  the  aforementioned  operations  or  of 
works  and  conveniences,  and  to  undertake,  execute, 
carry  out,  sublet,  dispose  of  or  otherwise  turn  to  ac- 
count the  same. 

(f)  To  construct,  manufacture,  buy,  sell,  install, 
lease  or  otherwise  dispose  of  and  deal  in  and  trade  in 
works,  machinery,  appliances,  instruments,  vehicles, 
supplies,  materials  and  articles  of  every  nature  and 
description  used  or  capable  of  being  used  in  the  pro- 
duction, manufacture,  operation,  distribution,  control 
or  other  application  or  use  of  hydrocarbons,  gas,  oil, 
electricity  or  any  other  power  now  known  or  which 
may  hereafter  be  discovered  or  invented. 


S3  Bi*sixEss  Tkv^sis  as  SrasriTVUBs 

(g)  To  maimfaotnro,  pnrebase  or  acquire  in  any 
lawful  maimer^  and  to  hold*  own,  mortgage,  |>ledge> 
sell,  transfer,  or  in  an^r  manner  dispose  of,  and  to  deal 
in  and  to  trade  in  gooils,  wares,  merchandise  and  pro|>- 
erty  of  any  kind  and  every  class  and  description,  ami 
in  any  part  of  the  United  States. 

(h)  To  acquire  the  good  will,  rights  and  property 
anil  to  undertiiDe  the  whole  or  any  part  of  the  assets  or 
liabilities  of  any  person,  firm,  association  or  corpora- 
tion; to  pay  for  the  same  in  cash,  the  Beneficial  Inter- 
ests of  this  Trust  Estate,  bonds  or  otherwise;  to  hold 
or  in  any  manner  dispose  of  or  conduct  in  any  lawful 
manner  the  whole  or  any  part  of  the  business  or  prop- 
erty so  acquired,  and  to  exercise  all  the  powers  neces- 
sary or  convenient  in  and  about  the  conduct  and  man- 
agement of  such  business. 

(i)  To  apply  for,  purchase  or  in  any  manner  to 
acquire,  and  to  hold,  own,  use  and  operate,  and  to  sell 
or  in  any  manner  dispose  of,  and  to  grant  license  or 
other  rights  in  respect  of,  and  in  any  manner  deal  with 
any  and  all  rights,  inventions,  improvements  and  pro- 
oasses  used  in  connection  with  or  secured  under  Let- 
ters Patent  or  Copyrights  of  the  United  States  or 
oUier  countries,  or  otherwise,  and  to  work,  operate  or 
develop  the  same  and  to  carry  on  any  business,  manu- 
facturing or  otherwise,  that  may  directly  or  indirectly 
^feetnate  these  objects  or  any  of  them. 

( j)  To  guarantee,  purchase,  hold,  sell,  assign,  trans- 
fer, mortgage,  or  otherwise  dispose  of,  or  deal  in,  the 
sto^s,  bonds,  or  shares  of  any  corporation*  associa- 
tion or  trust  estate  engaged  in  any  busiiMfis  ber»n 
named,  or  of  this  State,  or  any  other  State,  oountry, 
nation  or  government,  and  while  the  owner  of  such 
stock  or  shares>  may  exercise  all  the  rights,  powers  and 


For  Business  Corporations  W 

privileges  of  ownership,  iBclnding  the  right  to  vote 
thereon,  to  the  same  extent  as  natural  persons  mi^t 
or  eonld  do. 

(k)  To  enter  into,  make  and  perform  contracts  of 
every  kind  with  any  person,  firm,  association  or  cor- 
poration, persons,  mnnicipality,  body  politic,  county, 
State,  government,  colony  or  dependency  thereof,  and 
without  limit  as  to  amount,  to  draw,  make,  accept,  en- 
dorse, discount,  execute  and  issue  promissory  notes, 
drafts,  bills  of  exchange,  warrants,  bonds,  debentures, 
and  other  negotiable  and  transferable  instruments  and 
eveidences  of  indebtedness  whether  secured  by  mort- 
gage or  otherwise,  so  far  as  may  be  permitted  by  the 

laws  of  the  State  of   ,  or  of  the  United 

States. 

( 1 )  To  do  any  or  all  of  the  things  herein  set  forth 
to  the  same  extent  as  natural  persons  might  or  could 
do,  and  in  any  part  of  the  world,  as  principals,  agents, 
contractors,  trustees,  or  otherwise,  and  either  alone  or 
in  company  with  others. 

(m)  To  have  offices,  conduct  its  business  and  pro- 
mote  its   objects   within   and   without   the   State   of 

,  in  other  States,  the  District  of  Columbia, 

the  territories  and  colonies  of  the  United  States,  and  in 
foreign  countries,  without  restriction  as  to  place  or 
amount. 

In  general,  to  carry  on  any  other  business  in  connec- 
tion therewith,  whether  manufacturing,  agricultural, 
mining  or  otherwise,  not  forbidden  by  the  laws  of  the 
United  States. 

Third:  The  Trustees  hereunder  shall  be  three  in 
number,  but  at  any  annual  meeting,  or  regular  or  spe- 
cial meeting  of  the  Trustees,  called  for  that  purpose, 
the  Board  of  Trustees  may  be  increased  to  five,  seven 
or  nine  members  by  the  then  Board  of  Trustees,  and 


84  Business  Trusts  as  Substitutes 

the  Trust  Estate  shall  rest  in  the  additional  Trustees, 
in  connection  with  those  already  in  office,  the  same  as 
if  they  were  original  parties  to  this  instrument;  and 
the  Trustees  herein  mentioned  shall  hold  their  office 
until  the  annual  meeting,  or  until  their  successors  have 
been  elected  and  have  accepted  their  trust. 

(b)  The  Trustees  shall,  at  every  annual  meeting  or 
adjournment  thereof,  elect  a  full  Board  of  Trustees 
to  serve  for  the  next  ensuing  year,  said  annual  meeting 

to  be  on  the   in   , 

each  year,  commencing  in  19. .. 

Fourth:  The  Trustees  are  authorized  to  employ 
all  necessary  or  proper  agents,  servants,  brokers,  at- 
torneys, employees  or  counsel,  to  carry  into  effect  the 
purpose  of  the  trust  herein  contained,  and  to  protect 
and  preserve  the  same,  and  to  provide  and  pay  out  of 
said  trust  estate  the  compensation,  fees,  commissions 
or  expenses  incurred  in  the  management  thereof.  To 
contract  for  and  on  behalf  of  said  trust  estate,  and  to 
bind  the  same  and  its  property  to  the  performance  of 
such  contracts;  to  borrow  money  on  behalf  of  such 
trust  estate  on  such  terms  and  conditions  as  said  Trus- 
tees shall  deem  best,  and  to  bind  said  estate  and  its 
assets  to  the  payment  of  such  indebtedness  and  to 
pledge  and  incumber  any  property  of  said  estate, 
whether  real,  personal  or  mixed,  for  the  security  of  the 
indebtedness  so  incurred,  under  such  terms  and  condi- 
tions as  to  the  Trustees  may  seem  best,  and  to  agree 
upon,  approve  and  fix,  execute  and  deliver  in  the  name 
and  on  behalf  of  the  said  trust  estate,  any  deed,  pledge, 
mortgage,  bond,  note,  endorsement  or  guarantee,  trust 
deed,  or  any  other  instrument  which  may  be  necessary 
or  proper  to  carry  out  the  terms  of  this  instrument. 
But  neither  the  said  Trustees  nor  the  said  certificate 
holders  nor  any  of  them  shall  be  in  any  manner  per- 


For  Business  Corporations  85 

sonally  liable  by  virtue  of  any  contract,  note,  bond, 
deed  of  trust,  mortgage  or  other  instrument  executed 
under  the  terms  of  this  paragraph,  but  the  same  shall 
fully  bind  the  property  of  the  said  trust  estate  for  the 
performance  thereof. 

(b)  The  said  Trustees  are  hereby  authorized  to  do, 
or  cause  to  be  done  in  any  lawful  manner,  all  the  things 
which  are  incidental,  necessary  or  proper  to  carry  fully 
into  effect  all  of  the  purposes  herein  enumerated  or 
powers  hereby  conferred,  the  general  authority  given 
being  intended  to  control  and  make  fully  effective  the 
power  and  authority  of  the  Trustees  under  this  instru- 
ment, notwithstanding  the  specific  enumeration  and  de- 
scription thereof  herein. 

(c)  It  is  expressly  understood  that  all  expense  in- 
curred by  said  Trustee  in  carrying  out  the  terms  here- 
of, as  well  as  all  liabilities  incurred  by  them  in  the  ex- 
ecution of  said  trust,  whether  arising  from  contract  or 
tort,  shall  be  considered  as  expenses  of  executing  said 
trust,  which  shall  first  be  paid  out  of  the  assets  and 
properties  thereof,  and  which  shall  be  a  first  and  prior 
lien  against  the  said  estate  and  property,  superior  to 
all  others. 

(d)  The  said  Trustees  shall,  in  their  own  name,  as 
Trustees  of  said  estate,  bring  any  suit  or  action  which 
in  their  judgment  shall  be  necessary  or  proper  to  pro- 
tect said  estate  or  to  enforce  any  contract  made  for  the 
benefit  thereof,  and  to  defend  in  their  discretion  any 
suit  or  action  against  said  estate  or  against  the  Trus- 
tees thereof.  The  said  Trustees  are  expressly  author- 
ized to  bring  or  defend  such  suit  in  their  discretion  or 
to  compromise  and  settle  any  suit,  claim  or  controversy 
in  which  the  said  estate  is  interested,  as  to  them  may 
seem  best,  and  to  discharge  the  same  out  of  said  estate 
and  its  assets ;  and  they  are  specially  authorized  to  pay 


86  Business  Trusts  as  Substitutes 

or  transfer  out  of  said  estate  and  its  assets,  all  sums  of 
money  or  property  necessary  to  discharge  any  judg- 
ment against  them  in  their  said  capacity  as  Trustees, 
together  with  all  court  costs,  or  other  costs,  including 
counsel  and  attorney's  fees  and  also  to  pay  out  of  said 
estate  or  its  assets,  such  sums  of  money,  or  transfer  or 
appropriate  property  thereof,  for  the  purpose  of  set- 
tling, compromising,  or  adjusting  any  such  claim  or 
controversy,  together  with  any  such  costs  and  expenses 
connected  therewith,  and  all  of  such  expenditures  shall 
be  treated  as  expenses  of  executing  this  trust. 

(e)  The  Trustees  shall  have  full  power  to  invest  and 
reinvest  the  trust  estate,  its  profits,  income,  increase, 
surplus  or  avails,  subject  to  the  terms  of  this  instru- 
ment.   But  the  trustees  shall  not  delegate  to  any  agent 
or  attorney  in  fact,  the  power  to  contract  on  behalf  of 
said  estate,  or  bind  it  to  the  payment  of  money,  but 
when  said  Trustees  have  agreed  upon  the  terms  and 
forms  of  any  contract  or  contracts,   or   other  instru- 
ment or  instruments  necessary  or  proper  for  the  car- 
rying out  of  the  purposes  herein  mentioned,  and  the 
execution  of  the  trust  hereby  created,  they  may,  by  res- 
olution or  other  written  authority,  designating  and  de- 
scribing the  form  of  such  contract  or  contracts  or  in- 
strument, authorize  an  agent  or  agents,  attorney  or  at- 
torneys in  fact,  to  countersign  and  deliver,  in  the  name 
and  on  behalf  of  said  Trustees,  auy  such  contract  or 
instrument,  but  in  no  case  shall  such  agents  or  attor- 
neys be  authorized  to  countersign  or  deliver  any  notes, 
bonds,  bill  of  sale,  mortgages,   trust  deeds,    encum- 
brances, or  pledges  transferring,  binding,  encumbering 
or  alienating  the  property  of  said  trust  estate,  whether 
real,  personal  or  mixed. 

(f )  The  Trustees  shall  hold  the  legal  title  to  all  prop- 
erty at  any  time  belonging  to  their  trust  and  shall  have 


Fob  Business  Corporations  87 

and  exercise  the  exclusive  management  and  control  of 
the  same,  and  the  right  of  the  said  Trustees  to  man- 
age, control  and  administer  the  said  trust  estate  shall 
be  absolute  and  unconditional,  free  from  the  control  or 
management  of  the  certificate  holders. 

(g)  So  far  as  strangers  to  this  trust  are  concerned, 
a  resolution  of  the  Trustees  authorizing  a  particular 
act  to  be  done  shall  be  conclusive  evidence  in  favor  of 
such  strangers  that  such  act  is  within  the  powers  of 
said  Trustees,  and  no  purchaser  from  the  Trustees  or 
one  loaning  money  to  the  Trustees  shall  be  bound  to 
see  to  the  application  of  the  purchase  money  or  loaned 
money  or  other  consideration  paid  or  delivered  by  or 
for  said  purchaser  or  leaner  to  or  for  said  Trustees. 

Fifth :  Stated  meetings  of  the  Trustees  shall  be  held 
at  least  once  every  month,  and  other  meetings  shall  be 
held  from  time  to  time,  upon  the  call  of  any  officer  or 
Trustee.  A  majority  of  the  Board  of  Trustees  shall 
constitute  a  quorum,  and  the  concurrence  of  all  the 
Trustees  shall  not  be  necessary  to  the  validity  of  any 
action  done  by  them,  but  the  wish  of  the  majority  of 
the  Trustees  present  and  voting  at  any  meeting  shall 
be  conclusive,  except  as  hereinafter  provided;  they 
may  adopt  and  use  a  common  seal;  they  may  make, 
adopt,  amend  or  repeal  such  by-laws,  rules,  and  regu- 
lations, not  inconsistent  with  the  terms  of  this  instru- 
ment, as  they  may  deem  necessary  for  the  conduct  of 
their  business  or  for  the  government  of  themselves, 
their  agents  or  representatives. 

Sixth:  The  Trustees  may  elect  officers,  who  shall 
have  the  authority,  and  perform  such  duties  as  the 
Trustees  may  determine.  They  may  combine  the  du- 
ties of  several  officers  in  one  person.  Two  of  such  offi- 
cers, elected,  at  least,  shall  be  from  among  their  own 
members.    The  Trustees  shall  have  authority  to  elect 


88  Business  Trusts  as  Substitutes 

or  appoint  temporary  oflBcers  to  serve  during  the  ab- 
sence or  disability  of  regular  officers;  to  fix  the  com- 
pensation of  any  or  all  officers,  agents  or  employees 
they  may  appoint,  and  are  likewise  authorized  to  pay 
themselves  such  compensation  for  their  services  as 
they  may  deem  reasonable. 

(b)  The  Trustees  shall  cause  to  be  kept  by  a  Secre- 
tary elected  by  them,  a  record  of  all  meetings  of  the 
beneficiaries  and  of  the  Trustees,  which  record  shall  be 
similar  in  character  and  of  the  effect  as  that  kept  in 
case  of  corporations,  and  so  far  as  strangers  to  this 
trust  are  concerned,  shall  be  conclusive  against  the 
Trustees  of  the  facts  and  doings  therein  stated. 

(c)  Any  Trustee  may  acquire,  own  and  dispose  of 
beneficial  interests  in  this  trust  to  the  same  extent  as  if 
he  were  not  a  Trustee  hereof. 

(d)  Any  Trustee  may  be  removed  for  just  cause. 
The  term  ''Just  Cause"  as  used  in  this  paragraph, 
shall  mean  any  cause  which  is  detrimental  to  the  inter- 
est of  the  trust  estate  other  than  political,  racial  or  re- 
ligious. Any  Trustee  may  file  charges  for  just  cause 
with  the  Board  of  Trustees  against  any  member  there- 
of, and  the  remaining  members  of  said  Board  of  Trus- 
tees shall  constitute  a  Commission  with  the  exclusive 
power  and  authority  to  investigate  and  determine  said 
charges. 

(e)  In  case  of  removal  of  any  Trustee,  a  statement 
of  the  cause  therefor  shall  be  set  forth  in  writing, 
which  statement  shall  be  in  duplicate,  and  shall  be 
signed  by  the  members  of  the  Commission.  The  copy 
of  said  statement  shall  be  delivered  personally  to  the 
Trustee  so  to  be  removed  and  the  other  copy  of  said 
statement  shall  be  filed  in  the  office  of  the  Trustees 
with  a  notation  thereon  showing  proof  of  service  of  a 
copy  of  said  statement  upon  the  said  Trustee.     Upon 


For  Business  Corporations  89 

filing  of  a  copy  of  said  statement,  in  the  office  of  the 
Trustees,  the  removal  shall  immediately  become  effec- 
tive. 

(f)  Whenever  a  Trustee  who  has  been  so  removed, 
shall  file  with  the  Commission,  within  five  days  after 
his  removal,  a  statement  in  writing  alleging  his  re- 
moval was  made  for  political,  racial  or  religious  causes, 
and  that  he  believes  that  upon  a  hearing  he  will  be  able 
to  establish  such  fact,  it  shall  be  the  duty  of  the  Com- 
mission to  order  a  hearing.  The  time  and  place  of 
such  hearing  shall  be  fixed  by  the  Commission  and  due 
notice  thereof  given  to  said  Trustee.  Upon  such  hear- 
ing, the  Commission  shall  determine  and  decide 
whether  or  not  the  removal  was  made  for  political,  ra- 
cial or  religious  causes,  and  the  Commission  shall  have 
no  jurisdiction  or  authority  to  review,  consider  or  de- 
termine any  other  question. 

(g)  In  case  of  death,  resignation  or  removal  of  any 
Trustee,  the  remaining  members  of  the  Board  of  Trus- 
tees shall  have  the  power  and  authority  to  elect  Trus- 
tees to  fill  the  unexpired  term  or  vacancy  thus  created, 
and  for  that  purpose,  a  majority  of  the  remaining 
Trustees  shall  be  sufficient  to  elect  one  or  more  Trus- 
tees as  above  stated,  and  such  Trustees,  as  above 
elected,  shall  occupy  the  same  relation  to  this  Trust  as 
if  they  were  original  parties  to  this  instrument.  In 
case  of  death,  resignation  or  disqualification  of  the  en- 
tire Board  of  Trustees,  a  new  Board  may  be  appointed 
for  the  unexpired  term  by  a  Court  of  Equity  of  com- 
petent jurisdiction. 

(h)  Neither  the  said  certificate  holders  or  any  of 
them,  or  their  property  shall  be  liable  for  any  indebt- 
edness or  liability  created  by,  growing  out  of,  or  aris- 
ing from  the  execution  of  the  said  trust  estate,  whether 
arising  from  contract  or  tort  of  the  said  Trustees,  their 


90  Business  Trusts  as  Substitutes 

servants,  agents  or  employees,  in  the  administration  of 
said  estate.  The  Trustees,  personally,  nor  either  of 
them,  nor  their  private  property,  whether  real,  per- 
sonal or  mixed,  shall  be  in  any  manner,  liable  for  any 
debt  or  liability  incurred  by  said  Trustees,  or  any  of 
them,  in  the  administration  or  management  of  the  said 
estate,  whether  arising  from  contract  or  tort  of  the  said 
Trustees  or  any  of  them,  or  their  agents,  servants,  or 
employees ;  and  neither  said  Trustees  or  either  of  them 
shall  ever  be  held  personally  liable  for  any  damage  or 
injury  to  person  or  property  caused  by  or  arising  from, 
incident  to,  or  growing  out  of  the  execution  of  said 
trust;  nor  shall  they  be  liable  for  the  acts  or  omissions 
of  each  other.  That  the  assets  of  the  said  trust  estate 
only,  shall  be  liable  for  any  indebtedness,  liability, 
wrong,  injury  or  tort  incurred,  arising  out  of  or  grow- 
ing out  of,  the  administration  of  the  said  trust  estate 
by  the  said  Trustees  or  any  of  them  or  for  any  act  or 
negligence  or  default  of  their  servants,  agents,  or  em- 
ployees in  the  administration  of  said  estate. 

(i)  The  said  Trustees  shall  use  ordinary  and  rea- 
sonable diligence  in  the  performance  of  this  trust,  but 
shall  not  be  liable  to  the  certificate  holders  or  any  of 
them,  for  any  act,  default,  failure  or  negligence  in  or 
connected  with  the  execution  of  the  said  trust,  pro- 
vided, the  same  shall  not  amount  to  and  constitute 
fraud,  embezzlement  or  wilful  breach  of  trust,  and  they 
shall  not  be  obliged  to  give  bond  to  secure  the  due  per- 
formance of  this  trust  by  them. 

Seventh:  That  for  the  purpose  of  evidencing  the 
respective  and  proportionate  equitable  interests  of  the 
said  certificate  holders  in  and  to  the  said  trust  estate, 
the  said  Trustees  are  hereby  authorized  and  directed 
to  execute  and  deliver  to  each  such  beneficiary  here- 
under, a  certificate  signed  by  the  officers  designated  for 


For  Business  Corporations  91 

that  purpose,  which  shall  evidence  and  set  forth  how 

many  interests  of  the  par  value  of 

Dollars  ($ )  each,  the  said  beneficiary  therein 

named  is  entitled  to  as  a  beneficiary  of  said  trust  es- 
tate. 

(b)  The   said  trust  estate   shall   be   divided   into 

( )  Beneficial  Interests,  all 

of  which  Interests  shall  be  of  the  expressed  par  value 
of Dollars  ($ )  each,  and  the  certifi- 
cates issued  by  the  Trustees  to  said  beneficiaries  shall 
be  substantially  in  the  following  form,  to-wit : 

Organized  Under  the  Common  Law. 

Number                                                  Shares 
Shares  Par  Value  $ 

Company 

General  Offices 

This  Certifies,  That is  the  holder  of 

Shares  in  the  Capital  of  the 

Company,  fully  paid  and  non-assessable,  subject  to 
Declaration  of  Trust  in  favor   of    said   Organization 

dated ,19 ,  and  recorded  in  the 

Records  of County, , 

and  transferable  on  the  books  this  Organization  in  per- 
son or  by  Attorney  upon  surrender  of  this  Certificate 
properly  endorsed. 

In  Witness  Whereof,  The  said  Organization  has 
caused  this  Certificate  to  be  signed  by  its  duly  author- 
ized officers  and  its  seal  to  be  affixed  hereto,  this 

day  of A.D.,  19 

Secretary President 

Shares  $ each. 

(c)  By  a  unanimous  vote  of  all  the  Trustees  at  any 
annual  meeting,  or  special  meeting  called  for  that  pur- 


92  Business  Trusts  as  Substitutes 

pose,  the  Trustees  shall  have  the  power  to  increase  or 
to  decrease  the  mimber  of  beneficial  interests  of  the  said 
trust  estate  to  such  an  amount,  from  time  to  time,  as 
they  shall  deem  expedient,  for  the  interest  and  ad- 
vancement of  the  trust  estate  herein  created,  and  such 
additional  shares  may  he  sold  for  cash,  exchanged  for 
property,  the  shares  of  other  companies  or  corpora- 
tions, or  distributed  as  dividends,  at  the  option  of  the 
Trustees. 

(d)  In  case  of  the  loss  or  destruction  of  any  certifi- 
cate of  beneficial  interests  issued  hereunder,  by  the 
Trustees,  the  Trustees  may,  under  such  terms  as  they 
may  deem  expedient,  issue  new  certificates  in  place  of 
the  ones  lost  or  destroyed. 

(e)  The  Trustees  may  from  time  to  time  declare  and 
pay  such  dividends  as  are  earned  by  all  outstanding 
beneficial  interests,  out  of  the  net  earnings  from  time 
to  time  received  by  them,  as  they  may  deem  advisable ; 
but  the  amount  of  such  dividends  and  the  payment  of 
them,  shall  be  wholly  in  the  discretion  of  the  Trustees, 
and  the  surplus  profits  or  earnings  shall  not  be  main- 
tained as  separate  fund,  but  shall  be  merged  into  the 
body  of  the  trust  property. 

(f)  Beneficial  interests  hereunder  shall  be  transfer- 
aible  only  on  the  books  of  the  Trustees  upon  surrender 
of  certificates  therefor  and  presentation  of  a  written 
transfer  thereof.  The  acceptance  of  a  certificate  of 
beneficial  interests  by  the  original  holder  or  transferee 
shall  make  the  person  named  in  said  transfer  of  certi- 
ficate a  party  to  this  instrument  as  if  such  party  had,  in 
person,  joined  in  the  execution  thereof. 

(g)  The  name  in  which  a  certificate  of  beneficial  in- 
terests stands  on  the  books  of  the  Trustees,  shall  be 
considered  by  the  Trustees  conclusive  evidence  of  own- 
ership, and  they  shall  not  be  required  upon  trans- 


For  Business   Cobporations  93 

ferring  such  certificate,  or  paying  dividends  on  such 
interests,  or  distributing  assets  upon  the  termination 
of  the  trust,  or  at  any  other  time,  to  inquire  in  any  way 
into  the  relations  between  assignor  and  assigns, 
pledgor  or  pledges,  trustee  and  beneficiary,  guardian 
and  ward,  or  in  any  other  similar  relation,  and  shall 
have  the  right  to  conclusively  presume  without  inquiry, 
that  the  holder  of  any  such  certificate  as  shown  by  their 
books  is  the  real  and  true  and  unconditional  owner 
thereof. 

Eighth:  Annual  meetings  for  the  election  of  Trus- 
tees and  for  the  transaction  of  other  business  shall  be 

held  in  the  office  of  the  Trustees  on  the   

,  in ,  each  year,  commencing  in 

19 . . ,  of  which  meeting  the  secretary  or  acting  secre- 
tary, shall  give  notice  by  mail  to  each  Trustee  at  his 
registered  address  at  least  ten  days  before  such  meet- 
ing, but  failure  to  give  notice  of  such  meeting  shall  not 
invalidate  the  proceedings  of  the  meeting. 

(b)  The  Trustees  may  call  the  certificate  holders  to- 
gether at  the  annual  meeting  of  said  Trustees,  upon 
ten  days'  notice  given  as  aforesaid,  at  which  meeting 
the  Trustees  may  submit  an  annual,  or  such  other  re- 
ports as  they  may  deem  advisable,  to  said  certificate 
holders  for  their  information,  and  the  certificate  hold- 
ers, at  such  annual  meeting,  may  nominate  from  among 
themselves,  candidates  for  the  office  of  Trustees,  pre- 
senting such  nominations  to  the  Board  of  Trustees,  but 
the  election  of  such  nominees,  by  the  Trustees,  shall  be 
wholly  optional  with  said  Trustees.  The  fiscal  year 
shall  end  each  year  on  December  31st. 

Ninth:  The  death  of  a  beneficiary  or  of  a  Trustee 
during  the  continuance  of  this  trust  shall  not  operate 
to  determine  the  trust,  nor  shall  it  entitle  the  legal  rep- 
resentative of  the  deceased  certificate  holder  to  an  ac- 


94  Business  Trusts  as  Substitutes 

counting,  or  to  take  any  action  in  the  courts,  or  else- 
where, against  the  Trustees ;  but  the  executors,  admin- 
istrators or  assigns  of  any  deceased  certificate  holder 
shall  succeed  to  the  rights  of  said  decedent  under  this 
trust,  upon  surrender  for  transfer,  of  the  certificates 
for  the  interests  held  by  him. 

(b)  It  is  expressly  agreed  that  the  said  trust  shall 
not  be  terminated  or  the  administration  thereof  in  any 
wise  interfered  with  or  suspended  by  the  death  of  any 
such  beneficiary,  or  his  incapacity  for  any  reason,  or 
by  his  said  interest  or  interests  being  by  process  of  law 
subjected  to  the  payment  of  debts,  or  in  any  way  vested 
in  any  heir,  assign,  creditor,  or  purchaser,  of  the  said 
beneficiary,  or  in  any  trustee,  assignee  or  officer  of  any 
court,  or  by  the  same  in  any  manner  being  divested  out 
of  the  beneficiary  and  transferred  or  vested  in  any 
other  person,  administrator,  executor,  trustee,  as- 
signee, or  personal  representative.  But  any  such  per- 
son who  may,  in  any  such  manner  acquire  or  become 
vested  with  the  ownership  of  such  certificate,  shall 
thereupon  succeed  to  and  become  entitled  to  all  the 
rights  and  equities  of  the  beneficiary  therein  named, 
and  the  beneficial  interests  in  the  said  trust  estate, 
upon  surrendering  the  original  certificate  to  the  said 
Trustee  with  such  proof  of  ownership  as  may  be  rea- 
sonably required  by  them,  and  the  issue  in  lieu  thereof 
of  a  new  certificate,  and  notwithstanding  said  change 
of  ownership  or  interest  in  any  such  certificate,  or 
death  or  insolvency  of  the  original  owner  thereof,  the 
said  trust  estate  shall  continue  and  remain  in  full  force 
until  terminated  as  herein  provided. 

(c)  The  ownership  of  interests  hereunder  shall  not 
entitle  the  certificate  holder  to  any  title  in  or  to  the 
trust  property  whatsoever,  or  right  to  call  for  a  parti- 
tion or  division  of  the  same,  or  for  an  accounting,  or 


For  Business  Corporations  95 

for  any  voice  or  control  whatsoever  of  the  trust  prop- 
erty or  of  the  management  of  said  property  or  business 
connected  therewith  by  the  Trustees. 

Tenth:  The  Trustees  hereunder  shall,  in  entering 
into  contracts  and  in  the  execution  of  notes,  bonds,  or 
other  written  instruments  obligatory  upon  the  said  es- 
tate, set  forth  in  appropriate  terms  that  the  said  in- 
struments are  not  entered  into  by  them  nor  binding 
upon  them  individually,  but  only  as  Trustees  of  this 
estate,  and  that  contracts  or  obligations  are  to  be  satis- 
fied or  performed  out  of  the  assets  of  said  trust  estate 
only.  But  the  failure  or  neglect  of  such  Trustee  or 
Trustees  to  so  declare  in  any  instrument,  contract  or 
obligation  entered  into  for  the  purpose  of  carrying  out 
the  objects  of  said  trust,  shall  not  be  construed  to  ren- 
der said  Trustees  or  any  of  them,  individually  liable 
thereon,  but  the  same  shall  be  obligations  binding  upon 
and  performable  only  out  of  the  assets  of  said  trust 
estate. 

(b)  It  is  further  expressly  agreed  that  the  said  Trus- 
tees are  fully  authorized  in  their  capacity  as  such  and 
for  and  on  behalf  of  said  trust,  to  receive,  collect,  re- 
ceipt and  give  full  releases,  acquittances  and  dis- 
charges for  any  sums  of  money  which  may  be  payable 
to  them  as  said  Trustees  for  the  benefit  of  said  trust, 
or  for  any  property  or  any  other  thing  of  value  which 
they  may  be  entitled  to  receive  on  behalf  of  said  trust. 

Eleventh :  This  trust  shall  not  continue  in  any  event 
longer  than  for  the  term  of  twenty  years,  at  which  time 
the  then  Board  of  Trustees  shall  proceed  to  wind  up  its 
affairs,  liquidate  its  assets,  and  distribute  the  same 
among  the  certificate  holders  of  the  beneficial  interests 
according  to  the  numfber  of  interests  held  by  them. 

(b)  For  the  purpose  of  winding  up  their  affairs  and 
liquidating  the  assets  of  the  trust,  the  then  Board  of 


96  Business  Trusts  as  Substitutes 

Trustees  shall  oontinue  in  office  until  such  duties  have, 
been  performed. 

In  Witness  Whereof,   the   said , 

and ,    Trustees, 

hereinbefore  mentioned,  have  set  their  hands  and  seals 
in  token  of  their  acceptance  of  the  trust  herein  speci- 
fied, for  themselves  and  their  successors ;  and  the  said 

,   Subscriber,  has  hereunto   set  his 

hand  and  seal  in  token  of  his  assent  to  and  approval 
of  said  terms  of  trust  for  himself  and  his  assigns,  the 
day  and  year  first  above  written. 

Trustee  (Seal) 

Trustee  (Seal) 

Trustee  (Seal) 

Subscriber  (Seal) 

State  of 


County  of  ^ 

I, ,  a  notary  public  in  and  for  said 

county  aforesaid,  do  hereby  certify  that 

,  ,  and  ,  per- 
sonally known  to  be  the  same  persons  whose  names  are 
subscribed  to  the  foregoing  instrument,  appeared  be- 
fore me  this  day  in  person,  and  acknowledged  that  they 
signed,  sealed  and  delivered  the  said  instrument  as 
their  free  and  voluntary  act  for  the  uses  and  purposes 
therein  set  forth. 

Given  under  my  hand  and  official  seal  this 

day  of ,  A.  D.  19. .. 


Notary  Public. 
My  commission  expires 


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